How do I identify non taxable dividends from PA municipal bonds within a fund that also has PA taxable dividends and US government bond interest?

[colotom]

How do I enter state municipal bond income from a 1099-DIV form?

[ThomasM125]

The non-taxable portion of the dividends will either be listed on the 1099 form and attachments you receive from the broker, or you will have to contact them and request that information.

After you enter your Form 1099-DIV with the tax-exempt dividends reported in box 12, you will come to a screen that says Tell us more about your Exempt-Interest Dividends. On that screen you will see where you can enter the state(s) associated with the exempt interest dividends.

[colotom]

I replied to the email version but I am not sure if I should have replied here.  I have entered in the manner you suggested, but here is my problem:  

My problem is that I have a 1099-DIV form with two state Muni bond funds, one in PA which generate non taxable interest dividends in PA (my state) and the other is in MD which has taxable interest dividends in PA.  I haven’t been able to input the data in such a way that it taxes the MD in my PA filing while correctly does not tax the PA exempt dividends (and some Government bond interest also not taxable in PA).  PA Dividend Income Worksheet 2025 keeps flagging errors no matter how I input the two state incomes that define the Box 12 Exempt Interest Dividends.

I have tried deleting the 1099-DIV form that causes the problem so I could reenter the data in a different way, but the PA versions of the forms stay in turbo tax with no apparent way of getting rid of them.

Thanks for your help on this

[SteamTrain]

@colotom 

1)  (You may be doing this OK already but just in case): For the US govt interest, for that you should be listing that $$ amount (related to box 1a $$) on a checkbox on the page right after the main 1099-DIV form.....you check the box for "A portion of these dividends is US Government interest"...then enter the amount on the next page

2)   THEN on the next page that asks  what states the $$ came from...it is critical that:

...2a) you select the first button, and go to the end of the list of states and select "Multiple States"...THIS SELECTION MUST BE DONE FIRST..no matter what you do next.

only then can you:

...2b)  select the second button and do the state breakdown....you only break out PA, and any US territories...and all other states it is just left as "Multiple States", you wouldn't indicate MD at all.  The total in the breakdown boxes must equal the total at the top of the page.

Where the Bond Funds themselves are located is immaterial...the detail needed is what states produced the $$ in box 12 of the 1099-DIV.

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An Example for a NC resident:

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[colotom]

I did exactly as you suggested.  Put in multiple states as first choice with the dividends that were earned by the MD bond fund, then put in the dividends earned by the PA muni fund.  Turbo tax ended up not taxing either the MD or PA dividends in the PA state calculations when it should have taxed the MD (Multiple State) earnings.  I had originally put them in in reverse order (PA dividends, then Multiple State dividends) and got the same incorrect result.  In addition got this error message when I reviewed the state return:

Dividend Income Worksheet: Exempt check box -- should not be checked.  Enter the tax-exempt portion of dividend income on a separate line in the tax-exempt dividends column.  Then the screen shot shows 

the PA dividends as non taxable on same line as Fed total non taxable dividends and the MD dividends on a separate line as non taxable in PA.  Don't know how this worksheet is populated.  I manually changed the numbers in the form that showed up, but it did not effect the results.  So I am still stumped.

[colotom]

A second attempt at correctly inputting the data so as to somehow induce Turbo Tax to tax the Federal Exempt Interest in my non PA muni fund.  No matter how I twisted and turned I could not get it to work.  I am a volunteer for the AARP Taxaide program here in PA.  We use the Taxslayer software to do taxes for our clients.  I input the same data into Taxslayer where it is somewhat convoluted, but there are step by step instructions on how to solve the issues I have with the PA non taxable dividends.  What it does is first input all dividends (US Govt dividends and Exempt interest dividends included) in the Federal calculations as though all are taxable in PA. Then in the PA state section subtract the non PA taxable dividends from the total which I manually calculate.  Result is what I understand to be the right answer.  I will efile my taxes through the AARP program (perfectly legally) and cheaper since I don't need to pay the state efile charge through Turbo Tax.  Sad since I prefer the continuity that using Turbo Tax has given me over the years.

[SteamTrain]

@colotom 

I'm not sure you actually followed my directions.

For the 1099-DIV form, on the page I showed above:

1)  You must first select the TOP radio button  (....."one state"....) and set that to "Multiple States" all by itself.

2)  THEN....select the second radio button, and enter the breakdown to PA  $$, and the remainder to "Multiple States"  $$ in the second table.

[colotom]

Not sure if I understood your directions.  I cannot select both the top button (one state then select multiple states), then select the second button (to put in the PA non taxable portion and the multiple state PA taxable portion).  I have to choose one or the other (one state or multiple radial buttons).  However I found a way to get the right answer and not have an error show up in the PA state return.   In the Fed return, I chose the one state button then multiple states.  Never mentioned PA or how much was due to the PA munis.  Then in the PA state "Adjust Federal Dividend Income", the only adjustment is to the PA Exempt Dividends (Muni Fund) to delete the non Muni portion of the fund.  Have to choose the "other adjustment" reason. The Gov issue (non PA taxed) flowed thru as did the MD muni (PA taxed).  I never mentioned the reason for the dividends to be untaxed in PA, was that they were PA muni funds.  Seems it should be wrong way to get there, but I could not find any other way to get the right answer.

[SteamTrain]

@colotom 

Yeah....for the buttons, you do what I said for the first one.

Then when you select the second one, the first button is supposed to disappear.....but it is required to be set set as "Multiple States" in hiding....which is why it needs to be doen forst.

It's just that the first button needs to be set to the Multiple States selection first before moving on to the second one.

Thankfully you found a way around it anyhow.

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For 1099-INT forms that have tax-exempt $$ in box 8 from different states...the first button selection is immaterial...as the second button takes precedence.   Thus an inconsistency in their programming that I've complained about to the supposed experts......but the powers that be don't seem to realize it's a problem with their software 1099-DIV form.

[colotom]

Thanks for your help.  Stepping back, neither TaxSlayer nor Turbo Tax identify the non taxable PA dividends as Municipal Bonds in PA or Government Bonds but simply sum the two together.  It was easier to find the solution in TaxSlayer because I had access to fairly extensive documentation for AARP volunteers and many other semi experts who volunteer along with me.  Seems Turbo Tax is getting a little less user friendly over the last few years, but that's just one person's opinion.