Turbo Tax Reporting of IRS Form 1040-SR Line 2a - Tax Exempt Interest Incorrectly for 2023

[DBecton]

In review of my 2023 Turbo Tax, filed Form 1040 Tax Filing, I have discovered an issue for which I do not understand its calculation. Its, Line 2a, Tax Exempt Interest. I have ONE Account that reported Tax Exempt Interest of $14,700 with a Line 11 Bond Premium of $1,911.35. The reported amount on my Form 1040-SR, Line 2a is $7,463?

I have read issues regarding Line 2a from previous years but what I read does not seem to apply as to the answer for my question.

If someone can help explain this calculation, it would be appreciated. Thanks

[tagteam]

Have you read through the thread below?:

https://ttlc.intuit.com/community/taxes/discussion/line-2a-tax-exempt-interest-does-not-follow-from-...

[SteamTrain]

@DBecton   AND be careful about what year taxes you are referring to.  Much of that older post refers to previous year tax forms, where the line numbering is different.

For 2023 1099-INT forms, premiums listed in box 11 refer only to a subtraction from box 1 $$.

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1) If you have box 8 tax-exempt income (on a 1099-INT), the premium subtractions for those bonds are shown in box 13, and not in box 11.

AND

2) if you did buy corporate bonds, or US treasuries in 2023, for which you might have paid out accrued interest to the seller of the bonds...then you might need to break up the 1099-INT into separate 1099-INT forms, since TTX does not cleanly handle the accrued interest  (you paid to the seller).

.

...i.e. for any bond types you bought in 2023, that you paid accrued interest to the seller,,,,you need to break out the $$ form that bond type into its own 1099-INT.  Thus, when buying corporate bonds with accrued interest, you'd create a separate 1099-INT (as-if from the same brokerage)...and report all of box 1, 11, and the accrued interest you paid-out on those corporate bonds, on that separate 1099-INT .  If you don't do that, TTX won't break out the accrued interest, and apply it as a subtraction to the proper bond type.

Same thing goes if you bought any US treasuries, or tax-exempt Muni's in any tax year...the box 2, 12, and accrued interest paid out on Treasuries, or the box 8, 13, and accrued interest paid out on Munis, when you bought them, each needs to go on a separate 1099-INT.

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Some year TTX might improve the software to start allowing us to assign accrued interest paid, to the proper bond type, when buying various bond types, on the follow-up page where it's entered...but so far, they have not done so.

[DBecton]

Yes, I researched this issue prior to this post, of similar Line 2a issues but all the posts seem to date back to 2020 or before and do not seem to help or apply here. I am using an installed 2023 Turbo Tax Premier Version, not Online.

In looking at the Data Source, it Says "1040/1040SR Wks : Tax Exempt Interest: From Interest Income Smart Worksheet (Schedule B), tax exempt interest, plus Exempt-Interest Dividends Smart Worksheet (Schedule B), plus tax-exempt interest from Schedules K-1 for Partnerships, S Corps, and Estates & Trusts,
MINUS adjustments to tax-exempt interest from Forms 1099-INT and 1099-OID Worksheets.

Well in my return, I do not have any additional Exempt-Interest Dividends and this description is pretty weak.

My example is pretty simple and not complicated. Among multiple Financial accounts that I have, I only show ONE Account having Exempt-Interest of $14,700 and with a Bond Premium of $1,911.35 (which a prior issue said to substract). Therefore with a Line 2a showing $7,463, my calculated difference ($14,700-$1,911.35)-$7,463) is 5,325.65. In looking at everything, I do not see anything that allows me to back into this figure.

[tagteam]

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@DBecton wrote:

My example is pretty simple and not complicated.

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It is seemingly simple, but then I'm not sure what to tell you because I have been unable to reproduce your results with the figures you posted.

For example, when I enter $14,700 in Box 8 and then $1,911.35 in Box 13, I wind up with $12,789 on Line 2a.

Are there any figures you did not post that should be taken into consideration?

[VolvoGirl]

Did you import any 1099 forms?  I would delete all your 1099 INT and 1099 Div and make sure line 2a and 2b and line 3 Dividends is zero.  Then enter each one again manually and check the 1040 after entering each one.  

[DBecton]

Yes, thank you, your explanation really helps a lot.

I do have a value on Line 13 in the amount of $7,589.47 (Bond Premium on Tax-exempt Bond). If I subtract $14,700-$7,589.47, it totals $7,110.53 which is closer now but still a $352.47 difference. From here, with your answer, it gets me close enough to feel that its basically right.

As far as the #2 part of your answer, that detail is right now beyond my comprehension at this point. I will have to do more research on understanding the accrued interest effect on things. lol

Thank you again!

[SteamTrain]

Yeppp..as I already noted...if you paid-out any accrued interest in the year, for any bonds you bought in 2023, then that is also a subtraction....BUT, when you enter those $$ in the adjustments on the follow-up page..... if you do that on a single 1099-INT that has box 1, &or box3, &or box 8 $$ on that one 1099-INT, then TTX software applies the accrued interest improperly in a proportional manner between the values in box 1,3, & 8. 

Which is why I indicated you need to create a separate 1099-INT for those separate bond types, whenever accrued interest is paid to the seller when you bought the bond(s).