How to handle Excess Roth Contribution

I made too much money to contribute to a Roth and I can't recharacterize it because I already have a traditional IRA (although I didn't contribute to it in 2024). I completed the paperwork to have the contribution and earnings returned -- the $8000 contribution and $400 in short term, long term, and dividends were returned to me in 2025. Only $329 of the earnings we actually earned in 2024 though. Here are my questions:

1. My tax software simply asks for the contribution and earnings I received in 2025. Doesn't this mean I will be taxed twice on a portion of these earnings?

2. My tax software doesn't ask me to characterize the earnings. Does this mean that they are being taxed like income rather than capital gains?

3. Can I reduce my overall tax liability by contributing to a traditional IRA because I had earned income but could not participate in an employer sponsored retirement plan?