Yes, if your wife made the traditional IRA contribution for 2023 then you will enter it in the IRA contribution section and make it nondeductible. TurboTax will fill out Form 8606 for you. The conversion will be reported on your 2024 return and the basis from your 2023 Form 8606 line 14 will be carried over to your 2024 return.
Please see How do I enter a backdoor Roth IRA conversion? for detailed instructions.
Yes , you can return the traditional IRA contribution by the due date. Only the earnings will be taxable and have to be reported on your 2023 return. The earnings will be subject to the 10% early withdrawal penalty since they are not the result of an excess contribution.
"The 10% additional tax on distributions made before you reach age 59½ doesn’t apply to these tax-free withdrawals of your contributions. However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax." (Pub 590-A)
"Certain corrective distributions not subject to 10% early distribution tax. Beginning with distributions made on December 29, 2022, and after, the 10% additional tax on early distributions will not apply to a corrective IRA distribution, which consists of an excessive contribution (a contribution greater than the IRA contribution limit) and any earnings (the portion of the distribution subject to the 10% additional tax) allocable to the excessive contribution, as long as the corrective distribution is made on or before the due date (including extensions) of the income tax return." (Pub 590-B)
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