Oh, I forgot this part: "Do I change the taxable amount on the 1099?"

You don't change the entry for the 14099-R. That is for money Out, and that is what happened.

You need to note the amount rolled over, and the taxable amount will be reduced.

But you also have Early distribution penalty. That's why the other 20% is supposed to be "made up" when rolling over indirectly.