gtd1234,
I've been purchasing TIPS for decades in a taxable account and, yes, I agree, the calculations and reporting are a pain. Most financial columnists strongly recommend buying them in a retirement account instead. Your situation is rare, or at least I never had to deal with it in the past, but with the recent markets and inflation, will likely be more frequent.
TurboTax is parroting the entry in IRS publication 550 (https://www.irs.gov/pub/irs-pdf/p550.pdf) :
"Bond premium amortization more than interest. If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can include the difference in Other Itemized Deductions on Schedule A (Form 1040), line 16.
But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. Any amount you cannot deduct because of this limit can be carried forward to the next accrual period."
which says you can wipe out all the interest and OID on the bond you purchased up to that Box 12 amount and anything past that is an itemized deduction, quite possibly of no value to you with standard deductions set so high these days. Not seeing the OID value, I wouldn't know if that pushed the total to exceed Box 12.
However, it is quite possible you can ignore Box 12. Publication 550, page 33, states that amortization is a choice you make in writing in an attached statement with the first tax return year you choose to amortize. If you didn't use the Amortizable Bond Premium adjustment on Schedule B for 2021, you aren't amortizing. Even if you did, it's unlikely you attached the statement, so in principle you could simply opt to stop amortizing and keep the 2021 reduced basis constant until you sell. However, it is conceivable that the IRS could argue that using the ABP adjustment at all on Schedule B is a choice in writing. (Doubt they have the staffing to get down into such penny-ante weeds.) If you want to be absolutely safe, I would suggest amending the 2021 return to remove the ABP adjustment and keep the original cost basis.
