State tax filing

1)  IF the actual $$ amount in box 11 isn't too high...the easiest solution to moving on, is to go to the end of the list of states and select "Multiple states" for the entire amount (desktop software uses the term, "More than one state").

 

2) the potential downside to #1 is that it makes all of the box 11 taxable on your own state's tax return.  What you have to do (if you want to ….this is not required)  is to break out the $$ amount that came from your own state's bonds, and any US territories (like Puerto Rico)….and the remaining amount form all the other states are just lumped together as "Multiple States".  

An example for an NC resident with $1000 in box 11:

 

NC.................................…..100

PR...................................…….50

Multiple States.............…..850

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To do this, you need the full consolidated 1099-B from Wealthfront (on paper), and you need to see and calculate the amount that came from just your own state's bonds for each Fund that you own.  Thus, if one of your funds issued $100 tax-exempt interest, and 2% came from your own state...then $2 came from your own state's bonds.  You have to do that for each fund that you own that reported tax-exempt interst, and total them together to get the final breakout values.   But as I said, unless box 11 is a large value, or unless your holdings included one that was specific for your own state, it may not be worth the effort.....and marking it all as "Multiple States" might be easiest.

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Another Example:  NC resident with a 1099-DIV, box 11= $1000  .  Only one fund issued the tax-exempt $$, and they say the 2% of the tax-exempt $$ came from NC bonds.   So....2% of $1000 = $20, so I break down box 11 as NC............................20

Multiple states....980

 

Thus removing $20 from NC income,  And I only save myself $1 in state taxes since NC would have taxed that income at 5%.  But if you have multiple funds in your account that issue tax exempt-$$, you have to do that calcualtion for each fund, and total them together yourself before entering the total values in the software.

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Subnote:  For 1099-DIV, box 11 breakouts noted above...MN and CA residents can't do this for Bond funds, unless the Bond fund holds 50% of it's assets in that state's own bonds.  IL residents aren't allowed to do it at all for Bond fund collections.

 

 

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

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