reporting Roth IRA excess contribution

Taxpayer was going to make a contribution to his IRA and then convert to a Roth.
Asset manager thought that was silly and had him make the contribution directly to the Roth. This was done in 2021 for 2020.
He doesn't qualify for a Roth due to his income level.
The funds in the Roth were distributed out to the taxable account before the 5/17 deadline, within days of the original contribution.
Funds were then contributed to a traditional IRA before the 5/17 deadline.

Asset manager issued two 2020 5498s reporting both contributions to both IRAs (total $12,000)

I thought that a 2020 1099-R would be issued reporting the correction (Code P), but 2021 form instructions indicate that this transaction will be reported on the 2021 form.

Doesn't that mean that there is pretty much a 100% chance of hearing from the IRS on this? What the IRS sees as of 2020 is (a) a contribution to a Roth when the income level is too high and (b) too much money in total contributing to IRAs.

Thanks.

No, I don't think so. I don't think we've ever had the IRS send any correspondence about this kind of situation. I guess they just don't have any computer systems that are smart enough to look into this sort of thing. But an auditor may ask about it if it's audited for some other reason.

Thanks for the response.

I am having trouble figuring out the reporting in Lacerte. I have two Forms 5498s. One reports a $6,000 contribution to an IRA and the other a $6,000 to a Roth IRA. As per OP, the contribution to the Roth IRA was withdrawn immediately. A 1099-R reporting the correction won't be issued until 2021. Do I just ignore the contribution to Roth? This does not seem right, but I am not making progress on figuring out the tax reporting.

Thanks.

https://www.irs.gov/pub/irs-pdf/p590b.pdf

The IRS says treat it as though contribution never happened.

Withdrawals of contributions by due date.

If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions.

The above C&P is from page 30

You might receive a 1099-R next year with code P. If you want to avoid amending, report the earnings in the current year using code 8.
Refer to the instructions for 1099-R/5498.

Or re-designate as 2021 contribution. (if he has a shot at qualifying for 2021)

You will get a 1099-R for 2021 as that is the year the contribution was withdrawn.

Thanks everyone. There are no earnings. Withdrawal happened the next day. I am aware of the 1099-R that will be issued for 2021. What I continue to have trouble with is wrapping my head around the fact that a tax document was issued reporting the contribution to the Roth IRA, but there is no reporting in the 2020 return to show that yes, this happened, but the contribution was corrected.

Thanks for the responses. I will leave this off the return and see what happens.