A better solution is for the IRS to start requiring that the issuers include "Agency" bond interest be includ3d in box 3 $$ amounts. Then there's no adjusting to be made.
Certainly, the IRS and the states would have to agree on which "Agencies" are included, since there may be some subtle differences among the states.
For instance, even though TVA bond interest is posted in box 1 of a 1099-INT, I'm pretty sure all states with an income tax exempt TVA bond interest...so why doesn't the IRS require the brokerages to enter those $$ in box 3 instead.
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Over the past years, I've seen posts indicating that several different state's forms have a way to enter those "Agency" $$ during the state interview...but my state software (NC) doesn't. Though, I can enter my TVA $$ in the proper place in my state forms using "Forms Mode" on desktop software, but that isn't available to the "Online" users.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
