Did you tell the trustee that this was a corrective distribution of excess contributions, or did you just make a regular withdrawal? A corrective distribution probably required extra paperwork. The trustee should have returned the $7000 plus any earnings that could be attributed to the contribution (any gains or growth). For example, if there was $50 growth between November and December, you should have withdrawn $7050. Box 1 would show $7050, box 2A would show $50, there would be no withholding, and box 7 would have codes 8 and J, not just J.
It sounds like this was processed as a regular withdrawal. (Are there still earnings in the account? Did it earn nothing?)
If you asked for a corrective return of excess contributions and they processed it incorrectly, and you can prove it, they should issue a corrected 1099-R. However, if you just asked for a withdrawal, then you did it wrong and you are stuck with the consequences.***
Delete the 1099-R and start the Roth IRA section over. Report that you made $7000 of contributions. When you are told you are ineligible and asked if you removed the excess, say no. You will be assessed a 6% penalty, or $420. Then enter the 1099-R as a regular withdrawal from the Roth IRA. You will be asked about prior contributions and prior withdrawals. Since you had no prior contributions (except the $7000 from 2024) and no prior withdrawals, this $7000 represents a withdrawal of contributions and should not be subject to income tax. So you should net a $280 return of the $700 withholding.
***I think it is too late to try to recharacterize the contribution as a non-deductible traditional IRA to do a backdoor Roth. I think taking a regular withdrawal messed up that option. But @dmertz might have a different option. Are you just late for 2024, or did you request an extension before April 15?
