This error can occur when you do not check certain boxes while entering your W-2 in the federal interview, not checking the interview question that you are in the military under the Personal Info tab, or not going through the special military interview which helps Turbo Tax to looks for military tax breaks.
To check, return to the federal interview, Wages and Other Income section, go to the W-2 input area and edit your military W-2. Check your numbers you entered in the form. The most important entry is the screen that asks: "Do any of these uncommon situations apply to this W-2?" At the top of the list is a check box for Active Duty military . Be sure and check that box.
To check the Personal Info section, click on that tab on the left of your screen in the on-line product or the tab at the top of the page in the desktop product. On the first screen about each taxpayer, there is a question asking you if that taxpayer was in the military. Check yes on the military member's info. This will trigger a military flow in the interview which asks questions about your service, and if you are in the Reserves, combat areas and more. After you have answered those military questions, go to the Hawaii interview.
In the Hawaii interview, you will see a screen titled, "Do you have any of these items taxed by Hawaii?". The very next area in the interview will be about Military Reserve and Hawaii National Guard Pay. this is where you answer the question and enter the amount of military reserve pay or Hawaii national guard pay to exempt from Hawaii tax.
