@dmertz
@frankharry , I don't think Turbotax handles this situation well. You will have to do a lot of calculations on your own. To know where you are for 2025, you would have to prepare form 8606 for each year that you took a withdrawal, updating as you go. The basis is not going to be fixed, since it also depends on investment gains or losses, and all withdrawals follow the pro rata rule.
Suppose the initial balance of your inherited IRA was $100,000 with a $50,000 basis. You withdrew $10,000 in 2021. Your new basis would be $45,000. Now suppose that during 2022 the account value grew from $90,000 back to $100,000. You withdraw another $10,000. That means that your 2022 withdrawal is 45% basis, or $4,500, and $5,500 is taxable. Now your basis for January 1, 2023 is $40,500. You continue this calculation forward.
Every withdrawal you made from 2021–2024 reduced the dollar value of the basis, and the percentage will fluctuate every year based on investment gains and losses. The only way the basis would remain the same percentage is if the money was placed in a cash account that pays zero percent interest.
If you want to claim a basis on your 2025 return, you will have to perform the calculation for every year from 2021 to 2025 to get that basis. You also would be able to file amended returns going back 3 years to adjust the taxable amount and claim a refund of the difference in tax. (2022 can be amended as long as you file before April 15, 2026. You have more time to amend 2023 and 2024, it is too late to amend 2021.)
What I can't tell you is how to report that non-taxable basis for an inherited IRA in Turbotax because I'm not sure the program handles that situation. I will ask an expert @dmertz to explain further.
