You get a distribution recorded on 1099-R. It has 20% taken out of it. You report that on the front of your tax return, with all of your other income. It (your income) has the deduction and exemption amounts subtracted from your total income, and regular tax is figured on that. Then your 1099-R ONLY is penalized at 10% later, and added to your tax, figured above. The total equals your total tax.
The 20% tax withheld from your 1099-R, along with all the other tax you've had withheld for the year(wages, etc.) is netted against your total tax, leaving you with a refund or balance due.
So in actuality, you are taxed twice on your 1099-R: once at your regular rate, plus an extra 10% penalty.
Go back into the 1099-R input screen, and make sure you don't have your distribution entered twice.
