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I will page @dmertz who can provide more information concerning this issue.
You must use a separate Form 8606 calculation to determine the taxable portion using the basis - if any - in the inherited IRA.
The problem is the software won't enter the correct Name:
And it won't handle the case where you too have a basis in your IRA and took a distribution.
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You can calculate the taxed portion on Form 8606 yourself to discover the proper amount for 1099-R box 2a.
you can start a separate tax return in desktop TurboTax and use that one to calculate the Inherited IRA taxed portion.
Then you have to fudge up a 1099-R that produces those amounts on Form 1040.
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After verifying you have the correct taxable amount on Line 4b,
E-file your return, don't file on paper.
After it is ACCEPTED ,
get Form 1040-X from IRS website and mail it in with your 8606, which you can also get in fillable PDF.
Note: since you are not changing any dollar amounts on your amended 1040-X, you can leave all the lines 1-23 EMPTY.
The names on 8606 should be "<owner> and <your name> BENE" or Beneficiary if it fits, and your SSN.
Part III explanation: "didn't include Form 8606 with e-File".
In a few months to a year, you will get an acknowledgement from the IRS.
Turbotax very definitely does include form 8606. I have no idea what your problem was.
In some cases, not all forms are ready on day 1. Sometimes the final versions of certain forms are not approved for e-filing until later in the tax season (end of January through February for most forms.) This is due to a combination of delays at the IRS and the time it takes to update the programming after the IRS approves the form. I don't know when form 8606 was ready last year or will be ready this year, but if you don't want to wait, you may have to file by hand again.
The desktop program has a 60 day money back guarantee.
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