Mass. tax return: TT amount as bond premium on tax exempt interest doesn't tie to 1099. TT doesn't ask for the this info, only imports total. Where does TT get info?

[SusanY1]

It is usually in Box 3 of 1099INT although sometimes it is in the details or statements attached to the 1099INT or the 1099B.  If you imported the data, and it is not present, then you should download a PDF or other manual copy so that you can add that detail.  If the detail is present, it was likely in the supplemental data transmitted during the import.

[pwerth00]

My Bond Premium is listed on the 1099 and seems to be taken into account for the Federal return.  However since most of the bonds are  tax free bonds which I have to pay Massachusetts taxes on this does not make a big difference for the federal taxes but that interest is taxed at 5% by the state.  The bond premium does not seem to be making its way to reduce by interest on the state return.  How can I make this happen?

[ReneeM7122]

You are correct, interest income on municipal bonds are not taxable to the IRS, and not taxable to the state as long as the bond is from your home state.  If you do need to pay 5% and it isn't carrying over to your state return from the 1099, please follow these steps:

1. Click on Federal > Wages & Income. 
2. Scroll down to the Interest and Dividends section and click on the Start/Revisit box next to Interest on 1099-INT. 
3. Answer Yes to Did you receive any interest income?
4. On the next screen, click on I'll type it in myself.
5. On the next screen, Let's get your 1099-INT or brokerage statement details, mark the box My form has info in more than just box 1 (this is uncommon).  
6. Enter tax-exempt interest in Box 8.

@pwerth00

[panther77]

To add to the answer, if you enter tax exempt interest in Box 8 of 1099-INT during easy-step process, you then hit continue.  it confirms the payors EIN.  then hit continue again.

A menu will appear about uncommon situations.  check the box our state doesn't tax all of this interest.  You can then enter what state the muni interest came from.  If you enter your state, this should flow thru to state tax return and being excluded interest on Sch. B of the state return.

[ReneeM7122]

You are correct.  Entering the tax exempt interest in Box 8 of the 1099-INT will confirm the payer's EIN, which will carry over until you can enter the sate from which the municipal bond came.  The state has to be the sate you live in for it to be non-taxable.

@panther77

[pwerth00]

Thank you.  I was not clear in my question and I'll give some more detail now.

I am trying to find how the tax free interest number is calculated.  This is important to me as in the State of MA I pay taxes on those bonds which are not MA bonds.  

Tax exempt interest is reported on 1040 line 2a.   This number comes from

    1040/1040 SR Wks line 2a.  This number comes from

     Schedule B  Interest Income Smart Worksheet  However The sum of the tax exempt interest in Box 8 does not equal the value on the 1040 line 2a.  Subtracting Accrued Interest got the number a lot closer but not the same as reported.  The Bond Premium paid was MUCH more than the difference between the values.

How can I track back to see how the tax free interest was actually calculated by Turbo Tax to make sure I am not paying tax on the bond premium?

[panther77]

I have found the following ties to line 2a on 1040 (tax exempt interest): the sum of tax exempt interest (line 8 on 1099-INT) less bond premium (line 13 on 1099-INT).  In addition, it includes from 1099-OID: OID on tax exempt obligations (line 11) less acquisition premium (line 6).  I find this in detail found in the 1099s received from brokerage companies - combine DIV, INT, and OID 1099s in one file.