Get your taxes done using TurboTax

@SweetieJean   Where is the pop up?  On the step by step or on form 8949? 

I just started a fresh return with the only transaction being the U.S. Treasury sale.  I don't see the pop-up. 

 

Never mind.  I see it on the 1099INT.  That is NOT the problem. 

The interest on the 1099INT was already excluded from NJ taxable income.

The problem arises when you have accrued market discount interest that comes from 1099B from a capital sales.  Turbotax adds it to the interest in Schedule B, which is correct.  But it is NOT taxable in NJ. 

The NJ module takes that accrued market discount from Schedule B and treats it as taxable interest. 

That is the bug and why NJ taxable interest is wrongly computed.