"Still on Schedule 2 there is "other taxes" equaling $1500. I believe that to be the penalty."

But it's not the penalty; it's the required withholding. Your tax or penalty isn't necessarily determinable at the time you ask for a distribution, and there might be an exception such as covid disaster distributions in 2020. The penalty is determined on the tax filing.

"How do I clear that in light of the penalty forgiveness in 2020."

That's a different issue.

You won't "clear" a withholding. It's already paid in.

You would need to confirm your client's distribution qualifies for the waiver of the penalty, which might be the coronavirus disaster or a job loss condition. You need to read what applies and use the program to accomplish what applies.