Retirement tax questions

Here is the final, definitive response from TurboTax:

Form 8949 Rounding

The 2020 TurboTax software has been modified to conform to the IRS instructions/guidance and industry guidelines.  Publication 17, 2020 Tax Guide for Individuals (on P. 13) provides that:

Rounding off dollars. You can round off cents to whole dollars on your return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.

The TurboTax program, beginning in 2020, now rounds the individual entries for sales price and cost basis and then computes the gain/loss based on these rounded numbers.  While we recognize that this may cause differences from the actual totals reported on Form 1099-B.  The rounding differences are well within the IRS built-in tolerances for rounding discrepancies.

When entering specific individual amounts from Form 1099-B such as Sales Proceeds and Cost Basis, the second paragraph above does not apply - as the entries are not considered by the IRS to be “two or more amounts to figure the amount to enter on a line”. 

As an alternative, TurboTax provides the ability to report Form 1099-B transactions as “summary transactions”.  If a detailed Form 8949 is required, then the TurboTax online program also has a new feature that will allow you to upload a pdf copy of Form 1099-B that will be transmitted to the IRS with the tax return (in many cases, this will not be required if you have only A or D transactions with no basis adjustments, which are not required to be reported on Form 8949).  TurboTax Desktop does not have the ability to include PDF documents in electronic filing.  If you choose to use the summary reporting method on TurboTax Desktop, you may need to mail the detailed information about your sales to the IRS using Form 8453.

Pub 17, 2020 Tax Guide for Individuals, along with the Instructions for Schedule D and Form 8949 are consistent with the above. 

FYI, I discussed this with the CPA who wrote it.  In summary, they made the switch to transaction-level rounding intentionally and do not view it as a bug, so they will not be updating their software to "fix" it.  The guy I spoke with left open the possibility that they'll revisit the issue for next year based on the feedback they're receiving, but he made even that sound pretty unlikely.  He said they made the change to be more consistent with IRS instructions about rounding and to be more in line with the "industry standard" approach.

Although this obviously wasn't the answer we were hoping for, I do feel satisfied that we now have the official, decisive response from Intuit on this question, so we can now all go about finishing our taxes.  I am satisfied that any discrepancy between our 1099-B and TT's calculated capital gain will be acceptable to the IRS and will not trigger an audit.  So really it's up to each of us whether you want to file with the discrepancy or use the workaround of reporting summary transactions and then mailing your 1099-B to the IRS w/form 8453.  Personally, I will be using the workaround because all the rounding results in a capital gain calculation that is significantly higher than my actual capital gain.  If the discrepancy were in my favor, I'd probably just go along with it.

Of course, this whole thing does beg the Q of why would I ever pay for TT Premier again?  But that's neither here nor there.