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Looks like I have this straightened out.

I will be filling out an IRA distribution form provided by my broker, schwab.

There is actually an area on the form where one can declare that the distribution is due to excess contribution.

The 6% penalty applies only to earnings on the excess contribution, if the distribution is taken before April 15th, end of tax year, it is that simple. This distribution is treated by the IRS as an "amount not contributed".

I can either determine the gains myself or have the broker's tax department use an approved IRS formula to determine the gains. This formula takes in the entire gain on the account and then applies a number proportionate to the excess contribution.

My account will see a slight penalty, my wife's account was down overall for the tax year, VLO grrrrr, so hers will be simple to clean up.

Thanks all for the input, great stuff.
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