My sister was fired from her job and needed money to pay bills. She took a disbursement of her retirement. Upon disbursement they took out almost 20% in taxes before she received anything. Now when we are doing her taxes the tax software is trying to take another 10 to 15% in tax penalties. Isn't this double taxation? How can they get away with this?

No, it is NOT double taxation. The 20% was a withholding, a down payment of taxes, so to speak.

An early distribution from a retirement plan incurs taxation at normal tax rates, PLUS a 10% Early Withdrawal Penalty. If she is paying a cumulative 35%, that sounds about right!