@ kevinntax wrote:
I selected Washington on one of the questions. See picture. Was this incorrect? I wasn't sure if this was asking about the states which the mutual fund invests in muni-bonds or the state that I lived in. Maybe I should have picked "I earned exempt-interest dividends in more than one state" and picked "multiple states". I didn't see it or understand it. I've already submitted my tax return to the IRS. But, not sure if matters since I live in WA state.
You should be OK, even though it technically may not be the correct choice, since I assume you don't know if any, partial, or all of the tax-exempt dividends were paid by Washington to the mutual fund. Often a bond fund has multiple states. But the choice of state there ultimately has no impact on the Federal return, where the dividends will be tax-exempt. The popup program help says:
"Even though these dividends or interest won't be taxed on your federal return, we still have to ask about them because most states will tax dividends or interest that are paid by another state. Exempt-interest dividends are usually interest payments on state or municipal bonds."
"You can select More than one state and continue if you live in a state with no income tax."
That's because it's moot in those states.
I admit that section is confusing. TurboTax is asking about the states that paid the tax-exempt interest to the mutual fund; i.e., which states the dividends were from. A lot of mutual funds get tax-exempt interest from several states, and often the broker or mutual fund company provides a tax supplement showing the breakdown for that fund by states and amounts, or has one on their website. However, this is not relevant in a state with no income tax. That's why for folks in no-income-tax states, the instructions tell how to bypass and continue by choosing "multiple states."
Even if you had chosen another state by accident, Washington state will still not tax it, since Washington does not tax personal income and doesn't even have a state return on which to tax it. So you should be OK with what you filed, since it does not affect your Federal return.
NOTE: I'm a fellow user and long-time forum volunteer--not a tax expert or TurboTax employee.
