You're not actually being taxed with an additional 10% penalty.
The withholding on the tax form your company sent reflects the normal withholding for the IRA distribution income, plus the additional 10% withholding for the penalty.
What you're doing on your tax return by inputting this form is reporting the income -- that is, the distribution, itself -- the 10% penalty, and the withholding shown on the 1099.
This is confusing to many taxpayers, because there are actually two tax assessments on this income -- the income tax on the distribution, and the penalty.
But the additional withholding is also being entered.
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