Schedule B accrued interest calculation error(?)

[jlmco]

I have four 1099-INTs which include supplemental information with Accrued Interest amounts. I have entered each accrued interest amount for each 1099-INT into TurboTax in the appropriate place through the Step-by-step input (as an adjustment amount labeled "My accrued interest" under the Reason for Adjustment menu).

The sum of the four accrued interest amounts is $8139.28. But it shows up on Line 1 of my Schedule B Part I - Interest as an Accrued Interest adjustment for only $3742.72. It is not possible to access the calculation or data to understand why more than half of my accrued interest adjustment is being excluded.

By messing with the amounts, I have determined that the 1099's which are being adversely affected are the two which have some tax-exempt interest reflected, along with taxable interest on the same forms. However, the accrued interest has nothing to do with the tax-exempt bonds which were purchased many years ago (so wouldn't have accrued interest in 2024) and, furthermore, were purchased as new issue bonds, not on the secondary market.

Can you tell me what is behind the calculation for the accrued interest adjustment and help me determine if this is an error? And if it is an error, LMK how I can override it.

[jlmco]

FOUND THIS ANSWER FROM A COUPLE OF YEARS AGO>>>

The problem is that TTX only provides one place to enter accrued interest......and the software can't know whether you are referring to box 1 $$$  (corporate bonds),  Box 3 $$ (treasury bonds), or box 8 $$ (Muni bonds ).  

And thus the software simply applies those accrued $$ proportionately (and improperly)  among the box 1, 3, & 8 $$ amounts.

_______

Your solution for reporting it properly is this:  If your 1099-INT is a mix of box 1, 3, and 8 in any combination. And if you have accrued interest to report for bonds you bought.....Then the all the bond interest for that bond type should be removed from that 1099-INT and entered manually on its own 1099-INT, from the same broker.  

Example:  You bought a Treasury bond with accrued interest that you can report for 2022. The Treasury bond interest is reported in box 3,  but that 1099-INT also has box 1 and box 8 $$ on it.  You remove all of the box 3 $$ (and box 12, if any) and put box 3 (and 12) $$ on it's own 1099-INT before indicating the accrued interest paid for that bond.  IF you don't, the accrued interest will be divided up proportionately (and improperly)  among boxes 1, 3, and 8

.....same thing goes for box 1 ( and 11) bond interest,

......or box 8 (9 and 13) bond interest. 

...If bonds purchased and related to any of the boxes 1 or 3 or 8 don't have accrued interest to be reported, those $$ can remain on the same 1099-INT form.

_____

Clearer?

Some day TTX may get on the ball and provide separate accrued interest lines for each bond type on the follow-up page, so that one 1099-INT can always be used.

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

‎April 4, 2023 4:20 PM

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