I spoke with turbotax phone support, Level 1 support referred me on to next level, which may have been CPA but he did not confirm with me. He tried to be helpful, agreed that I should file Form 8959 but stated that turbotax would not include Form 8959 with my electronic return. In other words, the answer I got confirmed that turbotax does not treat this situation correctly, and if I file electronically I will pay more tax than I owe. The only solution offered was to override Line 16 on 1040 by manually adding the amount on Line 24 from Form 8959, then printing off the return and mailing. In essence, turbotax does not handle this situation correctly and I am on my own. I guess after several years with turbotax I can go back to Taxcut next year and see if it can do this correctly. Needless to say, I am not impressed.
