Thanks for the detailed response and apologies for the reply delay. In this instance, the problem is in CA540. The i Bond interest is further complicated by the fact that this is a tax return for a minor. The tax is carried over from FTB3803. I can see this in CA540 b/c the tax appears on line 31, a direct carry over from FTB3803 (Turbo Tax checked the box indicating that it carried the tax over). However, when I look at FTB3803, this is parent's election to report child's interest and dividends, I can see that there are two lines for interest income: 1a is taxable interest income and 2b is tax-empt interest income. The instruction clearly states: "do not include [the 1b] amount in 1a." However, Turbo Tax, in copying over my child's w2, copied the *same* interest income into both 1a AND 1b. I do not know why TT does this, but given that my child _only_ has interest income from one source, the sale of US Treasury I Bonds, I do not believe that I have made any mistake about whether the interest is taxable at the State level or not. Yet, TT includes the amount line 1a and 1b in form 3803. Then, as expected, line 1b is ignored for purposes of computing State tax on dividend and interest income. The amount of tax computed on line 9 of FTB3803 is then carried over to CA540. This is particularly frustrating in that I cannot figure out how to edit forms directly in the online version of TT so I printed out the form(s) and scratched out the wrong numbers and hand wrote what I believe the correct numbers. This is doubly irritating b/c I did not carefully read the TT forum *before* starting my child's taxes. I should have purchased the disk, not the online version so that I could at least do my child's taxes on one copy. Instead, I paid for a separate online account for my child and had to edit and correct the work by hand myself. In this instance, I feel as if TT took my money for no value whatsoever. And the benefit of online filing was lost. B/c my child is a first time filer, I had to print and mail by hand regardless. Of course that is another problem w/ TT process flow. B/c State filing relies upon Federal filing, while CA State would allow a first time filer to pay electronically, the Federal does not. And if the Federal does not, the State cannot process. TT let me declare online filing and payment for the State even though the Federal required physical printing and mailing in a payment. Then TT created errors in my State filing so I had to go in and changing the filing and payment process was unintuitive. Again, a benefit of the disk over the online version. I think the lesson (for me, not necessarily for everyone) is to stick with the disk next year. This was actually my first year using online instead of the disk. And TT could not pull over my information from the prior year "disk". Sigh.
