If Schwab is acknowledging that they are in fact going to treat this as a rollover, then you will not owe tax on any of this money. Although it is a little strange to me that it will take them until May to get you a corrected form.
However, if you have talked with Schwab and are certain that they are going to treat this as a rollover, then when you are doing your taxes on Turbo Tax
, TT should ask you for any amounts that you took from your IRA as a distribution, and you would enter the $42,000. However, they should also be asking you for any amounts that you rolled over, and you would again enter the amount of $42,000. The two amounts would then in effect zero each other out.
There has to be a question in the Turbo Tax interview process that you missed pertaining to how much you rolled over, and that is what is causing this error. Do you recall seeing such a question in the TT interview?
If this was helpful please press the Accept button. Positive feedback is also appreciated.