State tax exclusions

[cliffoehme2]

I have investments in American Funds, and some of the dividends are tax-exempt. They provide a 1099-DIV and provide two worksheets.  Here are the titles:

1. Federally tax-exempt income dividends: State tax exclusion worksheet

2. State tax exclusion for U.S. government income worksheet 

Only one mutual fund has a value in Box 12, the one with "tax-aware" in the title.

Both of them talk about state tax exclusions, and I am confused if they apply to federal tax or (Indiana) state tax.  And, of course, exactly how to enter those into TurboTax.

I have already downloaded the 1099-DIV from American Funds directly into TurboTax.

Can someone advise on how to handle these documents?

[DianeW777 · Accepted solution]

Yes. Enter your 1099-DIV as usual including the amount in Box 12, then continue to enter the requested information.

1. Do these uncommon situations apply? Select 'A portion of these dividends are from US Government interest'
2. Enter US Government interest - enter the amount from your statement
3. Tell us more about your exempt interest dividends - Select 'I earned exempt interest dividends in more than one state'
   1. Select your state from the dropdown and enter the amount for 'Your State' on your sheet.

Note: The reason for these selections is to show the amount that is exempt for your state.  TurboTax will carry this information to your state return. There is exempt interest dividends in your account for other states which will be considered taxable by your state.

                               

                             

                         

[cliffoehme2]

Thank you.  The first one I did went well (Growth & Income Portfolio) but TurboTax did not present me with "Tell us more about your exempt interest dividends".  It just returned me to the 1099-DIV screen.  I picked the next one which happened to be the Tax-Aware.... fund and went through the same process, but this time when I hit continue I did get the Tell us more screen.  I selected the "Multiple States" option and entered the Indiana number as well as GU, PR, VI numbers also.

As others have stated on the forum, it appears that TurboTax won't let you proceed unless the total of all the boxes on that screen is equal to the total entered for that fund on your 1099-DIV.  So, to make that happen I added another "state" called Multiple States and placed the remainder of (1099-DIV minus (IN, GU, PR, & VI)).

Does that seem like the right way to handle it?  Once I did that TurboTax was happy and returned me to the 1099-DIV screen to do the next fund.

[DianeW777]

Yes, you can handle it that way. The key is to be sure the amount that should be tax free for your state is accomplished.  The other states will provide the exact results that should take place on your resident state return.  

The IRS has specifications that must be met by TurboTax for e-file.