Interest Adjustments

OK......could be simple, could be more complex.

1) IF you only have (say) Muni bond interest to report, the Muni interest goes in box 8 of a 1099-INT , and the amortized premium amount goes in box 13.  (can be total of all Munis at one financial Institution).  Then on a follow-up page, there is a box to check to indicate you have an adjustment to make.....and continuing on to the next page, you enter the $$ amount about the accrued interest you paid, and select the accrued interest reason from the dropdown menu.   

The Financial institution you hold those bonds in should already show the box 8 and box 13 values on the 1099-INT they will issue to you sometime in the next 3 or 4 weeks, and you only need to enter the accrued interest on the follow-up page.

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Complications for the Software:

2)  If the 1099-INT you receive has Muni interest in box 8, and ALSO has any $$ in boxes 1, and/or 3, along with the box 8 $$....then you will need to remove the box 8 and box 13$$ from that 1099-INT, and create a NEW 1099-INT, as-if from the same Financial provider (manual entry), that reports just the box 8, 13, and accrued interest on it's own 1099-INT.

WHY?   The problem is the "accrued Interest" entry.   If any accrued interest is entered for (say) a Muni Bond, on a 1099-INT, and that 1099-INT contains a mix of box 1, 3, & 8 $$, then the accrued interest is improperly applied proportionally among those boxes, when it is only supposed to go against the box 8 $$.

3) Same thing for the other bond types for boxes 1, or 3 when reported on a single 1099-INT....if any of those bond types need to subtract accrued interest you paid to the seller....those boxes (box 1 & 11 $$$ or box 3 &12  $$$ ) would need to be pulled out and reported on a separate 1099-INT.

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Final Complication:

4)  You can only subtract the amortized premium and accrued interest in the tax year you actually get a first interest payment from that bond....so sometimes you just have to write those values down and claim them the next tax year.