SECURE act allows those who are having a baby to take 401k payout of up to $5k w/o paying 10% penalty. Turbotax has no option to enter this and keeps adding the penalty.

To enter the exception for the penalty, follow these steps:

1. Several questions after entering your 1099-R, you will get a screen that says:  Let's see if we can reduce your early withdrawal penalty
2. Select Continue
3. Enter $5,000 in the area for Another reason, select Continue
4. The next screen should remove the penalty.

For the Qualified Birth or Adoption Distributions, the IRS requires you to attach a statement that provides the name, age, and tax id number of the child or eligible adoptee.  Because of this requirement, you will need to paper file your return.