So Ive never had to deal with this in prior years, but this year on my 1099 DIV. Box 12 I have 850.00 in exempt interest dividends. Im under the impression these do not get federally taxed but heres whats weird.
Initially when I entered the 1099 DIV I missed box 12. At that point my fed return was about $300. When I realized I didnt enter box 12 on my 1099 DIV, I returned to the income section and in the 1099 DIV I added in the $850 exempt interest dividends, but now I OWE $237 federal taxes.
Whats even more strange is if I eliminated all of my business deductions, my federal retun would then go to 0 instead of owing $237.
Any idea why these exempt divs are affecting the federal return negatively?
Thanks
tax exempt interest can increase the portion of social security benefits that are taxed. It can also affect the alternative minimum tax. The only way to know for sure is to view the return before and after entering that interest. However, online Turbotax may want you to pay before you can see your return.