Both items were interest that is tax-exempt on the Fed return but is taxable to NC. The first item was "Exempt-interest dividends" in Box 10 of the 1099-DIV. These are interest on Municiple Bond Mutual Funds, that are tax-exemp on the Fed. The interest com,ing from NC-based bonds, is also tex-exempt in NC. However, in mycase, the majority of these dividends were from Municiple Bonds that are based on areas other than NC. These are Taxable to NC and need to be added to the income on Fed AGI on line 7 of the NC D-400 form to compute "additions to FED AGI" to arrive at NC Taxable Income.
Your dividends worksheet did a GREATJOB with these, based on my personal dividends, not from NC Bonds. It alloed yuou to break-down the dividends for those that WERE taxable to the State and those that were also tax-free to the State (the NC based bond funds.) Thank you!
However, I received a lot of Fed Tax-exempt dividends that were Taxable on NC but not on Fed. There did not seem to be anyplace to input these, and I ende3d up putting them in as an over-ride that should have shown uip on line 3 of the Supplemental Schedule S for NC. But instead of showing thatnumber, the Turbo Tax program put THE TOTAL of this adjustment on line 3, and then an incoorect number on line 4, which ended up double counting my personal non-NC based bonds bonds. (The total Adjustment actually went thru correctly oin the TT program, but the amounts in section A of the D-400S were on the wrong lines and thusly overstated the Adjustment on the schedule S. HOWEVER, NC auditors apparently use the raw numbers on Sch S and came up with the over-stated amount. And expected to see it on the D-400 form as the correct total additions to income, then claiming I UNDER-stated my Adjustment to income on the D-400, expecting to see the wrong tyotal.
Anyway, I did not notice all this before I mailed in the return, and now receved a Notice from NC-DOR that I owe additional tax. Between penalties and interest, they say I owe a large number to them to account for the error.
