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If the code in box 7 of the Form 1099-R is 3, no Form 5329 is needed and TurboTax will not generate Form 5329 for this distribution.
If the distribution was made before the normal retirement date with regard to this retirement plan, the distribution will be reported with wages on Form 1040 or 1040A line 7. Otherwise, the distribution will be reported on Form 1040 line 16 or Form 1040A line 12. Either way, the distribution is taxable as ordinary income and, due to the disability exception indicated by the code 3, is not subject to an early-distribution penalty.
Since your disability distribution will be reported on line 7 with other earned income, if any, you might be eligible for earned income credit.
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