Turbo tax desktop does not allow me to show that a portion of the dividends on my Schedule K-1 are from US Government securities and therefore exempt from state (Michigan) tax. The entry on my Michigan 1040 only shows US Gov Security income included on my 1099-Div. The only way I've found to include the US Gov Security income from my Sch K-1 on my Michigan return is to override the value automatically generated by the software (from 1099 Div and 1099Int). If I override this value manually, the error check indicates the return may be rejected. What do I do?
Enter the US Government Security income as US bond interest to remove it from your Michigan (MI) tax return. Do not enter that portion in the K1 entry. When you enter it as a 1099-INT, box 3, then use the payer as K1 XXXX.
TurboTax knows it is not taxable to any state. Remove it from your K1. You will manually enter the income using the steps in the link.