How to file correction for state return post refund processing?

[pkpagrawal]

Did e-file of federal and state tax return and already got the refund. Tax filing included interest from Treasury Direct. Recently came to know that interest from Treasury Direct is only taxable in federal. Checked my return and found that it got taxed in the state tax filing also. How to get it corrected?

[VolvoGirl]

What state?  Treasury interest on your tax refund is taxable. Its not the same kind of Treasury interest on. Savings Bonds and mutual funds.  

Dud you get a 1099int or letter for it?  What box is it in? Should be box 1.  

Box 3 of Form 1099-INT shows the interest income you received from U.S. savings bonds, Treasury bills, Treasury notes, and Treasury bonds.

IRS interest is none of those.

[pkpagrawal]

Thank you for response.

The interest income that I am referring for Treasury is for T-Bill. As per few online articles (e.g., https://www.investopedia.com/terms/t/treasurybill.asp) which indicates that interest income from T-bills is exempt from state and local income taxes.

As per F-1099, only box 3 is filled but looks like the Turbotax filing had the number in box 1 due to which it got charged for state also.

Any idea how to get it corrected considering that tax filing is already done and refunds are also processed?

Thanks

[SteamTrain · Accepted solution]

@pkpagrawal 

The instructions to amend just the State tax return are noted in the following TTX help article:

How do I amend my state tax return? (intuit.com)

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1)  Once you get the State amended process actually started, you will then make the change in the Federal income section, where you will Edit that Treasury Direct 1099-INT and move the $$ from box 1 and into box 3.  Once you get into that 1099-INT, there is a box to check that allows all the other boxes to display.

2) Though the change is made in the Federal section, moving the $$ from box 1 to box 3 doesn't change the Federal taxable interest any.....just the state taxable income.

3)  Then go back to the State section and run thru it all to make sure it's set up OK, and error check.   Don't know if the state amended forms can be e-filed or not.....probably not, so you may have to print the state amended forms out and mail them into your state's tax department.  Would be a good idea to print out the state forms anyhow to make sure the state taxable income was changed/lowered appropriately.

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What went wrong?   Hard to know exactly.  The 1099-INT forms from Treasury Direct cannot be imported directly into the tax software, so you'd normally have to enter those $$ yourself manually.

The BUT to that is that TTX has been allowing people to transfer tax form data into the software by taking a picture of various forms....if you did that with a printout of the Treasury Direct 1099-INT...then that could have been the problem....NEVER trust taking a picture, and if you do you absolutely MUST edit the form afterwards to make sure everything went into the right boxes.  The software AI that interprets the data from a picture, is just not good enough to be error free yet, and seeing the scattered problems it's caused this year, I do not trust it. IF a direct import isn't available for a particular form, just enter it manually.

[pkpagrawal]

Thank you for your response, I will try to file amend using the steps you suggested. Originally I did a e-file but if amends needs physical copy to be sent then need to explore options for that also as I have now moved out of USA.

Thanks again.