IRS rule: "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."
So, only the amounts that have to be entered on the return have to be rounded. To see what amounts have to be entered on lines, look at the Forms and Schedules TurboTax generated to be filed. Apart from Schedule D, some 8949s might be generated. On the 8949s for almost all taxpayers, there will be at most only a few transactions (transactions with adjustments, sales of stock that were acquired before 1/1/2012, CDs, SLV and GLD ETFs). All the amounts to be entered for these transactions have to be rounded according to the IRS. However, the number of transactions to be entered on these 8949s is for almost all taxpayers relatively small compared with the number of transactions that are not on these 8949s: They are entered lumped together on line 1a (ST) and line 8a (LT) of Schedule D. Nowhere in the return are the amounts (proceeds and cost) for the individual transactions that constitute the lumped proceeds amount and lumped cost amount reported on a line. Therefore, according to the IRS instructions, they are not rounded, because they are not entered on any line. The only line that is reported on the return is the sum of the proceeds and the sum of the cost, and according to the IRS instructions these sums have to be rounded. Because these sums are the result of a summation, this summation has to be done with the unrounded amounts for these transactions as stated in the strict rule by the IRS: "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." However, TurboTax is rounding the proceeds and cost amounts before the summation, which is a clear violation of the IRS rule.
