After you completing entry of the Form 1099-R the program would have taken you to a screen where you could have entered an exception to the early distribution penalty (Form 5329). Where you should have entered the amount of the distribution in the box labeled Incorrect Early Distributions. This would have removed the penalty.
Go back and on the Form 1099-R Entries screen, edit the Form 1099-R. Follow the interview until you get to the screen labeled These Situations May Lower Your Tax Bill
