First, double-check the date of birth for the person receiving the Form 1099-R distribution. If an early distribution penalty is being included, it could be due to an error in the date of birth.
Second, after you enter the Form 1099-R, there are several follow-up questions that you need to answer so that the correct taxable amount can be determined. Be sure to keep going through all of those questions until the program takes you back to the list of all types of income that you can enter. If you leave the Form 1099-R section too early, all the questions may not have been asked yet.
To go through them again, go back to the Form 1099-R that you entered, edit it, and then click Continue without changing anything on the form itself. Then the questions will come up that need to be answered.
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