It's not an error. The calculations are correct.
MAGI is not a single number. There are about a dozen different definitions of MAGI, depending on what it is being used for. MAGI for the Roth IRA contribution limit is different from MAGI for other purposes. You might be looking at a definition of MAGI for a different purpose.
(1) The income from the Roth conversion is supposed to be subtracted from your AGI.
If you are using the CD/Download TurboTax software, open the Roth IRA Contribution Limit Worksheet in forms mode. Right click line 1 and click Data Source on the pop-up menu. The explanation of line 1 says "Any amount due to a Roth conversion is subtracted out."
Also, in IRS Publication 590-A, look at Worksheet 2-1, Modified Adjusted Gross Income for Roth IRA Purposes on page 39. The first three lines of that IRS worksheet subtract "income resulting from the conversion of an IRA . . . to a Roth IRA" from your AGI.
(2) The non-taxable portion of your Social Security income is not supposed to be added back. The taxable amount of Social Security can be recalculated using your income after subtracting the Roth conversion income. But there is still a non-taxable amount of Social Security that is excluded from AGI. The recalculation does not apply, and will have no effect, unless your income is above the phaseout threshold for reducing your Roth IRA contribution limit. In Publication 590-A see the note at the bottom of Worksheet 2-1 and follow the instructions there.
