@mgfrobozz
Your solution is the normal way these Agency $$ are entered when received as "dividends" in box 1a of a 1099-DIV form...usually as a part of dividends received from a Mutual Fund.
BUT
All these issues in the above discussion are about US Agency bond $$ issued and listed in box 1 of a 1099-INT form.....received from individual bonds the person owns. And there is no similar follow-up question for the 1099-INT forms. (I just rechecked the software, in case they've adjusted the 1099-INT interview in the past few months....they haven't).
Normally, US Treasury $$ will be listed in box 3 of a 1099-INT and will be handled appropriately by the state software as not being state taxed.......but US "Agency" $$ (TVA, FHLB, etc) will show up in box 1 of the 1099-INT.
Would be nice if the IRS would get together with the various states with an income tax, and see if they treat any, or all of these special US Agency $$ the same, and if so, direct the brokerages to start including those $$ in box 3 of the 1099-INT. Then we all wouldn't be struggling with this somewhat subtle issue.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
