Despite an IRR being similar to a Roth conversion, it is not a Roth conversion as the term "Roth conversion" is used in the tax code. Section 408A(c)(3)(B)(i) defines MAGI as excluding amounts included in income under section 408A(d)(3) which refers to the movement of funds only to a Roth IRA. The taxable rollover of funds to a designated Roth account, described in section 402(A)(c)(4), is not included in this definition.
So yes, your IRRs, indicated by the taxable amount in box 2a of the code-G Forms 1099-R, are not permitted to be subtracted when calculating MAGI for the purpose of determining the limit on Roth IRA contributions. TurboTax is working correctly and is determining your excess Roth IRA contribution correctly. All versions of TurboTax behave the same with regard to this.
Section 402(A) came about several years after section 408A. Whether there was a conscious decision to not add IRRs to the definition of this MAGI or simply an oversight, the law applies as written.
