Entering accrued interest after downloading info from broker

[pbix]

I own some bonds.  Some of them are taxable and some are tax-free.  I bought some bonds and paid accrued interest on them during 2021.

I used TT to download the 1099-INT with all the information about these bonds from my broker.  TT correctly downloaded my interest income from these bonds.  But (1) TT did not take note of which states my tax-free bonds are from, and (2) TT did not take note of the accrued interest I paid.   So I have to enter that information manually.  

Then in addition, when I go to enter the accrued interest, TT displays this message:  "Since you have more than one kind of interest listed on this interest statement, the amount of your adjustment . . . will be prorated between the different kinds of interest income.  If you want this adjustment to apply to only one type of interest income, create a separate 1099-INT for each type of interest income and enter an adjustment for the appropriate type of interest income."

Questions:

1.  Why doesn't TT automatically take in the information about which states the tax-free bonds are from when it downloads the information from my broker?

2.  Why doesn't TT automatically take in the information about accrued interest paid on bond purchases when it downloads the information from my broker?

3.  Why doesn't TT provide a simple way to allocate accrued interest to the correct kind of bond income, without requiring the user to create separate 1099-INTs from the same broker?

4.  If I simply input the total accrued interest and allow TT to prorate it between the different kinds of interest income, as it says it will, is that OK with the IRS?

5.  I am using TT Deluxe.  Would TT Premier or some other edition do a better job with the above points?  Would it automatically consider the state information, the accrued interest, and proper allocation of accrued interest?

Thanks.

[RobertB4444]

Why TurboTax does what it does is not within the scope of this forum.  However, prorating the accrued interest across the different types is fine and I don't believe that you will get any different program features for this part of the program in premiere.

[SteamTrain · Accepted solution]

for

#1) States: While the Broker has that information, I suspect (opinion) that the software companies and the financial services companies haven't found a way, or perhaps haven't agreed on a way to arrange the specially-formatted tax files to include that information in a usable/error-free way.  

#2) similar situation for including the accrued interest in the download file, but I think this would be far easier to eventually include than #1 if the companies involved ever agree on how to format the download files.  But that agreed format has to be done between the Providers and the various software companies.  The 1099-B and the supplemental worksheets you get at the end of each year is entirely different from the tax download files they create for importing the data.

#3)  That would be fairly easy for TTX to program into the follow-up page....they already have multiple lines on the follow-up page for user-entered premium amortizations (if not already included in boxes 11, 12, or 13 on the actual 1099-INT).

#4)  BUT I think you should bother to do it (break it up into separate 1099-INT forms) even if the IRS might not notice....................... I've had to break out box 1, and 8 into separate 1099-INT for a number of years for those accrued interest values when I buy a bond with accrued interest, so it's kind-of second nature now and is really pretty easy to do.   All my accrued interest has been for box 8 recently, so when I have box 3 $$, I can just include it with the box 1 1099-INT....but that's just my situation.   

#5?  NO, Premier doesn't handle it any different.....upagrading won't help.

[pbix]

OK.  Thank you for that detailed answer.

[SteamTrain]

@pbix

One other thought this morning.  (Though, perhaps you already know this.)

When you do create the 2 or 3 separate 1099-INT forms, the each of the premium amortization box pairs, boxes 1&11, boxes 3&12 or box 8&13 values, have to be on the same 1099-INT form.