TurboTax has what I believe is a bug but TurboTax Product Quality has declined to correct. TurboTax will not generate Form 5329 for a fist-time homebuyer distribution from a Roth IRA if the amount on Form 8606 line 23 is zero (because the sum of your qualified first-time homebuyer distribution and your basis in original contributions is zero), even though your basis in contributions are less than the amount distributed and you would have a penalty were it not for the application of some or all of the distribution to the first-home purchase.
Make sure that you are not claiming as used for the first-home purchase any portion of the distribution that Roth IRA distribution would otherwise be nontaxable and penalty-free anyway (your basis in Roth IRA conversions more than 5-years ago plus your basis in original Roth IRA contributions). These amounts are already tax and penalty free.
If any of your distribution would be subject to penalty without claiming the first-time homebuyer exception, a workaround to get TurboTax to prepare Form 5329 when Form 8606 line 23 is zero is to claim the exception on $1 less than you would otherwise claim. This will cause $1 to appear on Form 8606 line 23 and cause TurboTax to generate Form 5329 where you can claim the first-time homebuyer exception on the same $1-lower amount. The 10% penalty on that $1 will round to $0.
Be aware that TurboTax has another long-ago reported but still uncorrected bug that TurboTax will not present the first-home questions again when editing the Form 1099-R. You'll need to delete the Form 1099-R and reenter it to get the first-home questions again.
