I contributed the $6500 limit to a new IRA account before the 2023 deadline since I was hoping to get a deduction. While I was entering the $6500 max deduction in the software, I learned that I can't deduct more than my earned income. I made less that $6500, and the software says I'm being penalized for the excess. Can I just replace the entered amount with 0 (or leave it blank)? Or do I have to report IRA contributions?
You can change it to zero or blank.
Don't make the contribution if it is disallowed.
You have to withdraw the excess from your IRA, including any income earned on the excess, or you will incur a 6% tax, every year on the excess until it's resolved (form 5329). If this was a 2023 contribution you just made, I think you can avoid some pain by withdrawing the excess by the tax filing deadline. See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits#:~:text=Excess%20contributions%20are%20taxed%20at,end%20of%20the%20tax%20year.
Yes that's the problem unfortunately, I think you have to undo that contribution to remove the excess.
But you may be able to do it tomorrow in time to avoid the penalty - you can contact the brokerage where the IRA is held to see what the process is.
You can also "absorb" the excess as an IRA contribution for 2024 rather than withdrawing it, if you know your earned income will be high enough, but you would still have to pay the 6% fee for 2023 if you leave it in the account.