When you take the money out of the 401K early there will be a 10% penalty.
You did the correct thing and had the taxes withheld and they are showing in box 4 of the 1099R.
When you report the 1099R, TurboTax will compute the correct tax and the penalty on the early withdrawal and THEN give you credit for the taxes you had withheld.
This is very similar to having taxes taken out during the year on your W-2 pay, then you file you report all the income and get credit for taxes paid in. Difference in your case, there is a 10% penalty, but you did the right thing and had the taxes withheld, and now when you file it is all reconciled.
