Thank you for all your input. I apologized as I probably did not explain the situation correctly:
Totally $8000 was removed from my pre-tax 403(b) plan. Among the $8000, $6400 was rolled over to a Roth IRA and $1600 was withheld for federal tax. I did not receive the $1600 and the financial organization said it was sent to IRS.
I received two 1099-R forms, one for the $6400 and one for the $1600. The 1099-R for the $6400 has correct information ($6400 as the "Grosse distribution" and "G" as the distribution code").
The issue is the 1099-R for the $1600 tax withheld for the federal tax. The "Gross distribution" in this form is "$1600", the "federal tax withheld" on this form is "1600" (so it does show the credit of the tax I paid), but the distribution code is "2" instead of "1". My understanding is that the $1600 should be considered as income because it was not rolled over to another pre-tax retirement plan. In addition, I should pay the 10% penalty for the $1600 because it was withdrawal from a pre-tax 403(b) plan.
I did contact the financial organization and they refused to correct the 1099-R for the $1600 as they insisted that the code "2" was correct".
That is the dilemma I have right now as I believe the code should be "1" (correct me if I am wrong). If I am correct, can I just put code "1" in when I put the information of the 1099-R form for the $1600 into TurboTax so I can pay the penalty as expected?
@DaveF1006
