On form 8606 (nondeductible IRAs) I have an amount of $1 on line 5 and 8. Because I also have a Rollover IRA with a balance much larger than $1 (line 6), the ratio on line 10 doesn't have a non-zero digit until the sixth digit after the decimal point, and Turbotax shows line 10 as "0.00000".
What is interesting, and this looks like a bug to me, is that line 11, which is supposed to be line 8 multiplied by line 10, shows $1.
Just reading the numbers shown in the resulting PDF, it looks like 1 * 0.00000 = 1, which is obviously wrong.
But even if Turbotax takes into account "behind the scene" the ratio beyond the 5th digit, the result should be rounded to $0. E.g. 1 * 0.0000063 = 0.0000063, which is closer to 0 than to 1. Why doesn't Turbotax round to the nearest whole number, i.e. $0?
I assume that such an error for $1 shouldn't trigger an audit, but it feels wrong that my conversion to Roth IRA is entirely nontaxable ($1 out of $1) in my return when in fact it should be taxable.
Your Roth conversion is tax-free when the taxable portion of the conversion is less than 50 cents.
That makes sense, as anything less than 0.5 would round to 0.
But in my case the non-taxable portion is less than 0.5, so I expect it to round to 0, and thus the taxable portion should be 1.
Form 8606 calculates the taxable portion of your distribution/conversion, not the non-taxable portion.
I don't understand your comment since line 11 description on the form is "This is the nontaxable portion of the amount you converted to Roth IRAs". So form 8606 does calculate nontaxable portions, on line 11, 12, 13.
Anyway, we're getting away from the problem I wanted to report. Let me rephrase it, focusing on the numbers calculated by Turbotax in my form.