I had another call yesterday with the support folks to discuss the problem with the Windows download version. My call got bumped up the ladder and was more productive than my first attempt. The most obvious problem was on the question where they ask if any of the Roth IRA distribution was used for a first time home purchase, and if yes, how much was used for that purpose.
My answers to these questions were not being saved. The support people were able to view my screen and see that the dollar entry was wiped out whenever I pressed enter. Saving the return before pressing enter or moving to the NEXT screen did not solve the problem. I also realized that there was no note about limiting the amount to be entered to $10,000, although that wording does appear on the online version.
The amount to be entered on the step by step screen asking if proceeds were used to purchase a first home was supposed to be transferred to Form 1099-R, immediately below the regular data reported by the payer. We went to that Form to see if we could enter the dollar amount there. The same problem occurred with that field; if you enter a number it disappears as soon as you press enter.
I also noticed that there was a check box just above the space for the dollar amount, to indicate if the distribution was a "qualified distribution". The IRS instructions specify that a distribution made after the 5-year period which meets the requirements under the First Time Homebuyers exception is a Qualified Distribution. In my case, the box was not checked, even though I had entered the date a Roth IRA was established and had answered yes to the question on the step by step asking if proceeds were for a first time home purchase.
I checked that box, and to my surprise, the tax due amount was reduced to properly reflect the tax free status of the Roth IRA distribution. This occurred even though the dollar amount on the line below was still blank! We then ran the edit checks to see if manually adding the check in the box indicating a Qualified Distribution would flag the manual entry as an "override" which prevents the electronic filing. The override error did not occur.
I have not done the electronic filing yet, but it appears this solves my problem. If you take a Roth distribution where only a portion of it was used for the first time home purchase, I think it would give the entire distribution favorable treatment (up to the $10,000 maximum on investment earnings), so it may not give the correct result in every case. But it worked for me!
The support folks agreed that the program contained an error and needed to be fixed. I have no idea if/when the fix will be made. But hope this helps others get around the problem.
Edited to add: Yes, Dmertz is correct about Form 8606 being missing from the filing. I suspected that, but if TurboTax does not correct this problem by the filing date, I will file it anyway. And then respond to the IRS if/when they come knocking. There is no question this is a TurboTax error, and the support person I spoke with agreed it needed to be fixed. Still hopeful they will do it quickly, but my backup plan is to file electronically. I just don't trust the USPS anymore.
