How many significant digits to the right of the decimal point does TurboTax print on Line 10 of Form 8606?

[fanfare · Accepted solution]

FIve. That's enough to get an accurate taxable portion with a relatively tiny prior years basis.

[mathemagician195]

Thanks for the quick response.  Not quite as good as Tax Act's six, but much better than H&R Block's 3.

[dmertz]

The IRS requires only 3.

Ultimately it makes little difference since whatever small amount of basis is or isn't applied in one year will be offset in a future year.  You'll never have more or less than your total basis applied to the total of your distribution across all tax years (unless your traditional IRA balance drops below your basis due to having a high proportion of basis, significant investment losses and distribute all money in traditional IRAs, resulting in unrecoverable basis).

[fanfare]

You should be able to duplicate the result with your own calculator using the fraction shown on the form.
If the software uses higher precision internally, that won't happen.
This was a problem with TaxAct some years ago but they fixed it.

[dmertz]

It appears that TurboTax does carry more digits than 5 internally, at least 7.  The difference is likely to show up only with distributions in excess of $500K.  Even though TurboTax displays fewer digits than are actually used in the calculation for Form 8606 lines 11 and 12, using the more accurate internal value avoids the possibility that not all of the basis gets applied to the final traditional IRA distribution if it happens to be a large one (contrary to what I said earlier about not losing basis).

[mathemagician195]

Thanks for the response.  I purchased the Premier version of TurboTax and have verified that it does calculate the cost basis accurately.  For what it is worth, I had previously purchased H&R Block's software.  Its imprecision was significant, producing a $72 error in the cost basis.