Your tax liability changes when you enter your year-end balance in traditional IRAs because until you do so TurboTax is unable to correctly prepare Form 8606 to determine the taxable amount of your Roth conversion. Once you make that entry, TurboTax corrects Form 8606 to produce the correct higher taxable amount of the conversion, applying less of your basis and retaining more of your basis in your traditional IRAs as dictated by the proportions now able to be determined properly. Failing to enter your year-end balance will result in you underpaying your tax liability.
