TurboTax does not have the ability to track basis in an inherited IRA and does not have the ability to prepare the necessary Form 8606 to calculate the taxable amount of the distribution and to identify that Form 8606 as applying to the inherited IRA rather than the individual's own IRAs. The Form 8606 for the inherited IRA must be prepared manually and the taxable result entered into TurboTax when TurboTax asks for the amount of the distribution that is taxable. The manually prepared Form 8606 must then be included with your mailed tax return.
