The IRS requires that all distributions must be reported as income on your tax return.
If the 1099-R has a "G" in box 7 then the software automatically understands that it's a rollover. The rollover is included in your total income, but it is not considered taxable income. However, that does not mean that it is being taxed or that it affects your tax in any way. The screen shows all income both taxable and non-taxable. The distribution will show on your tax return with the word ROLLOVER next to it. You have to check the actual 1040 return. Line 16b is the taxable amount and it should say ROLLOVER by 16b (1040A line 12b). TurboTax will include the entire distribution on Form 1040 line 16a or Form 1040A line 12a but exclude the amount rolled over from the amount shown on line 16b or 12b.
