Taxpayer used an off-the-shelf tax software product from 2016 to 2020. Made excess Roth contributions each year.  (He claims the software didn't provide a notification or diagnostic.)

The rule is that an excess deferral may only be corrected by a distribution of the excess amount, plus allocable earnings. Are there strategies that would meet the rule but reduce the 6% penalty?

The 6% Penalty will likely be 8K.

1. I haven't read any rule that mandates that the withdrawal of the contribution and the earnings has to occur when discovery of the error is made.   This implies timing, either within a year or to a future year.   Although risky, it might be worth it to wait for a market downturn.  There are almost 5 months left in the year and so there could be time for a downturn.

2.  Could the IRA custodian somehow lower the balance prior to the distribution? The goal would be to reduce the closing balance below the balance of the Roth "immediately before" the contribution. Shooting yourself in the foot perhaps. If there are winners to offset losers, then it makes a bit more sense.

Then I read a bit about dollar-limited distributions, making ordinary distributions, and something called "absorption" and thought about asking a wealth-advisor referral to take this case. 

Finally: Who computes the income/earnings allocable to the distribution?  Does the custodian or must the taxpayer do it?

Thanks for your thoughts.