Why does Turbotax say "you won't have to pay tax on your $ rollover" for 1099-R 2020 RMD rollback, but then proceeds to use the $ in tax calculation?

Please be aware that the whole distribution will show as income in TurboTax on the summary screen which shows gross income, not taxable income. To verify that the entry is correct please look at form 1040 line 4b/5b (taxable amount), it should state ROLLOVER next to it.

To preview Form 1040:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left

Please follow these steps to enter your 1099-R and RMD rollover:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Continue until "How much was a RMD?" and select "none"
5. Continue "Tell us if you moved the money through a rollover or conversion" and select "I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)"
6. Continue answering the questions.

 You must indicate to TurboTax that none of the distribution was RMD. If you already enter the 1099-R as RMD and changing your answer to the RMD question doesn't work then you have to delete and renter the 1099-R form. 

[Edited 1/31/2021 | 12:30pm PST]

You must not change the taxable amount in box 2a.  The amount in box 2a of a Form 1099-R reporting a regular distribution from a traditional IRA, including a distribution that is rolled over, is required to have the same amount in box 2a as is in box 1.  It's reporting that distribution as having been moved to another retirement account that makes the distribution nontaxable.

If TurboTax asks, you must indicate that none of the distribution was RMD.  If you previously answered this question by indicating that some or all of the distribution was RMD, delete the 1099-R form from TurboTax and reenter it.  Then indicate that you moved the money to another retirement account or returned it to the same account, then indicate the amount rolled over.

Thanks for the reply. Problem corrected. Confusing part is Turbotax didn't say I should use "none" box if I took my RMD but then rolled it back to IRA because of CARES Act. It only tells what to do if you took RMD but didn't do a rollback to IRA. (Also Turbotax doesn't caution users about the rollback restriction that you had to do the rollback before Aug. 31.) (IRS Notice 2020–51  Guidance on Waiver of 2020 Required Minimum Distributions)

The software does not take you to the rollover questions if you indicate you inherited this IRA. I unchecked the "Did you inherit this IRA" question and selected "None of these apply" instead and was then able to follow the solution. Note that even RMDs from "inherited IRAs" were eligible for rollover under IRS Notice 2020-51. Intuit needs to correct their software.