I'm pretty sure I figured out why the non-Arizona municipal interest income entries and total shown in the State Taxes section of TT are wrong. In the Federal Taxes section, TT prompted me to fix an error in box 8 of a 1099-INT Worksheet. The corresponding 1099 included tax-exempt interest from multiple states, but there were no entries for the individual states in box 8. (Maybe I failed to supply that data somewhere in the EasyStep process.) I resolved the problem by filling out the table in box 8 with state IDs in column (a) and corresponding amounts of interest in column (c). TT calculated the percents of total interest in column (b). Note that box 8 in the 1099-INT Worksheet shows tax-exempt interest and box 13 shows bond premiums.
In the State Taxes section, TT calculates the non-Arizona municipal interest income for each state using the following formula:
(total tax-exempt interest - total bond premium) x (percentage of total interest from box 😎
The problem is that the per-state percentages from box 8 were calculated for the interest, not the bond premium. As a result, the total and per-state income numbers are wrong.
I ran into the same problem last year, but I don't remember how I managed to override the tax-exempt interest income in the State Taxes section.
