TurboTax will indeed automatically create Form 8606 whenever you enter a code-J Form 1099-R. However, to get the correct calculation on Form 8606 you must click the Continue button on the page that list the Forms 1099-R that you have entered and then, when TurboTax asks, enter or confirm your basis in Roth IRA contributions so that TurboTax will include this amount on Form 8606 line 22. On Form 8606 the amount on line 22 will be subtracted subtracted from the amount of distributions. With line 22 being larger than line 21, the resulting taxable amount will be zero and your contribution basis carried forward will be reduced by the amount of your distribution.
