If the excess is withdrawn by the due date with earnings, the earnings will be taxable in the year the excess contribution was made (2020). The taxable amount will also be subject to the 10% penalty. Perhaps Schwab did not understand that an excess contribution was being removed, since their answer suggests they were referring to the earnings status once the Roth became qualified.
Definitely DECLINE any withholding on the excess removal. If nothing is said, the IRA default withholding rate of 10% will be withheld (or perhaps a pre specified rate used previously) and the amount of earnings is too small to mess with withholding.
In fact, with recent market losses there might be a loss and therefore no earnings to be taxed or penalized. You will get a 1099R next January coded to indicate that earnings (if any) are taxable in 2020 even though the contribution was for 2019.
It is possible that state withholding is mandatory, but that would only apply to a very few states. Suggest you specifically decline state as well as federal withholding and Schwab will then advise if your state has a withholding requirement.