Any distribution from a retirement account is reported to the IRS on 1099-R, and you report it as retirement income. If you were under age 59 1/2, you will see a distribution code in Box 7 of your 1099-R corresponding to your situation. In your case, you may see distribution code 1.
Continue through the entire section for entering the 1099-R. You will reach the screen: Let's See If We Can Lower Your Tax Bill.
See the screenshot below. On the screen These Situations May Lower Your Tax Bill.
Distributions to the extent you have deductible medical expenses that exceed 10% of your adjusted gross income whether or not you itemize your deductions for the year are not subject to the penalty. You'll still pay tax on the distribution but would avoid the additional 10% penalty for early distributions.
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