Keep in mind that the age 59 1/2 rule applies to the 0% early penalty withdrawal. This is not related to having taxes withheld from your distribution.
Simple example, assume you took a $10,000 withdrawal and had 20% withheld for federal taxes. You would have received a net check for $8,000. Your 1099-R will show $10,000 in box 1 as the gross distribution. Box 4 would show $2,000 for federal taxes withheld. You will need to enter both numbers in TurboTax to property account for the withdrawal. If you don't enter the box 4 withholding amount, you will be paying income taxes on $10,000 but won't have any taxes withheld to offset the tax.
