Instructions for Form 5329 says this:
19 Qualified birth or adoption distributions. Attach a statement that provides the name, age, and TIN of the child or eligible adoptee.
Since you can't attach statements in the program, you would need to mail it. While this doesn't strictly address claiming them as dependents, I would think that might be a given.
Topic 410 limits the amount to $5,000
Additional 10% Tax on Early Distributions
If you receive pension or annuity payments before age 59½, you may be subject to an additional 10% tax on early distributions, unless the distribution qualifies for an exception. The additional tax generally doesn't apply to any part of a distribution that's tax-free or to any of the following types of distributions:
- Distributions made as a part of a series of substantially equal periodic payments that begins after your separation from service.
- Distributions made because you're totally and permanently disabled.
- Distributions made on or after the death of the plan participant or contract holder.
- Distributions made after your separation from service and in or after the year you reached age 55.
- Distributions up to $5,000 made within a year of the birth or adoption of your child to cover birth or adoption expenses.
https://www.irs.gov/taxtopics/tc410
