gs406,
I do not want you to throw away money via Schedule A as it is unlikely you will have enough itemized deductions to overcome the current high standard deduction. TreasuryDirect reports TIPS interest on their 1099-INT form, box 3, rather than on 1099-OID box 2. If TurboTax is insisting that 1099-OID box 2 is the only place to find interest, TurboTax has a bug. (On the paper Schedule B, you tot up the OID and ABP (adjustable bond premium) numbers and subtract each total from the total interest.) I'll report it as an issue to the TurboTax powers that be. I suggest the following workaround:
Shift your TIPS-related interest from 1099-INT Box 3 to the 1099-OID Box 2 field for the securities. This keeps the total interest reported to the IRS constant but now correctly pairs the interest earned against the bond premium. If this results in a positive difference, you are done. If not, as I discussed earlier, if you haven't already told them that you do want to amortize the bond premium, you can simply enter it as zero on the 1099-OID page. If you had already begun deducting bond premium in prior years, you can do what I did which is write the letter to the Treasury folks telling them that I do not want to adjust for bond premium in the future and change your TIPS cost basis from your original cost basis by subtracting the amount of bond premium you have already taken. They will respond with a letter confirming your choice. Be aware that this choice applies to all of your TreasuryDirect holdings, not to just one particular security.
