Client had IRA withdrawal under CARES and elected to spread over 3 years (30,000 per year).

The 30,000 taxable in 2020 shows on Line 4B and is included on Line 9 as total income.  However, on the worksheet to compute an IRA deduction, Line 4 does not include the 30,000.  

One of the taxpayers is not covered by a plan so we deducted $7,000 IRA contribution.  IRS has computed an adjustment based on including the 30,000 in modified AGI.

Is the worksheet calculation correct or is IRS correct?