Hi I start Graduate school on January one and want to withdraw funds from my IRA to help pay for it. The IRS allows this penalty free. Can turbotax file this tho?

Yes Turbo Tax can handle that.   You will get a 1099R for the distribution.   After you enter it (or maybe it's after you go through the Deductions section) it will cover exceptions to the penalty.  

The withdrawal is reported to you on a Form 1099-R.  You would receive the form in January 2022 from the IRA plan administrator for any withdrawals made in 2021.

TurboTax supports entry of a Form 1099-R and will ask if there are any exceptions to the early withdrawal penalty after the tax data from the 1099-R is entered in the program.

To enter, edit or delete a form 1099-R -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Wages and Income (Personal Income using Home and Business)
• Click on I'll choose what I work on (if shown)
• Scroll down to Retirement Plans and Social Security
• On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

Or enter 1099-r in the Search box located in the upper right of the program screen.  Click on Jump to 1099-R