Simply withdrawing $6,500 does not undo the Roth IRA contribution. If you want to undo the contribution you must explicitly request a return of contribution. The Roth IRA custodian will then calculate the income attributable to the excess contribution and distribute the combined amount. The attributable income will be taxable on your 2023 tax return and will be treated as ordinary income. Nothing earned in an IRA treated as capital gains. The $6,500 portion distributed will not be taxed. Fidelity has a specific form for requesting a return of contribution.
You also have the option to recharacterize the contribution to be a traditional IRA contribution instead. The $6,500 plus the attributable income would be transferred to a traditional IRA. The attributable income will simply become income in the traditional IRA. The resulting traditional IRA contribution may or may not be deductible depending on whether you or your spouse is covered by a workplace retirement plan.
Whichever you do, your 2023 Form 5498 from the Roth IRA will show a $6,500 contribution. You'll receive a Form 1099-R (a 2023 form in the unlikely event that the transaction can be accomplished in 2023, otherwise a 2024 form) showing either the return or recharacterization.
If you fail to make the correction, you'll have a 6% penalty on the $6,500 each year until you correct the excess.
