Bought a house and got a 1099-R, I thought we wouldn't need to pay penalty if 10k was used to purchase house for first time

[AnnetteB6]

If you took at distribution from an IRA to use to purchase your first home, then you can exclude up to $10,000 of that distribution from the early distribution penalty of 10%.  However, you will still be subject to income tax on the distribution.  

After you have entered the Form 1099-R, there will be a series of follow-up questions.  One of these will be a page of possible exceptions to the early distribution penalty.  This is where you will enter the $10,000 (or less) amount to reduce the early distribution penalty.

If your distribution was from a retirement plan and not an IRA, then the exception will not apply.

See the following TurboTax help article for more information:

Are there exceptions to the early distribution penalty on an IRA?