Federal Exempt Interest taxable in NC not adding back correctly - 2020 1099-DIV

[mfrank]

Hello,

Problem: 2020 federal tax exempt interest is reporting on NC D-400 return line 9 Deductions from Federal AGI but it should appear on line 7 Additions to Federal AGI instead.

The interest appear in box 11 Exempt interest dividends on my Vanguard 1099-DIV. No state is listed on this 1099-DIV.

This income is federal tax exempt but taxable in NC. It is not state tax exempt.

In some prior years Turbotax online had a question that handled this correctly. This year the online interview seem much simpler.

I have tried all permutations in the federal income area and nothing places the amount on the correct NC D-400 line.

So far I have spoken with two Turbotax live support agents and neither one could solve this.

I have gone as far as paying for filing and have downloaded a PDF of my returns, but I have *not* filed yet.

Has anyone solved this problem? How?

[SteamTrain]

just to make sure..

....Edit the 1099-DIV AGAIN...

1)  make sure a real number is in box 1a...even if it is a 0.00.  Don't leave it blank

2) Continue to the next page (uncommon situations) and click "None of these apply"

3) Continue to the next page   "Tell Us More...." , and just in the top box choose "Multiple States' from the end of the list of states.

4) Continue out to the main menu and check your NC "Additions" again.

[mfrank]

Thanks, I will try this and let you know what happened

[SteamTrain]

@mfrank 

Ahhhhhh

and...when you check your PDF, make sure you use the Print Center within your tax file itself...left side of the screen under the "Tax Tools" selection..

((((....I'm not sure what menu TTX is presenting this year for people to Print after they have paid. ))))

[mfrank]

I've tried this and the best I can do is to remove the federal exempt income as an NC deduction, but I still cant find a way to make it an NC addition.

The only somewhat relevant page I can find is titled "Here's the income that North Carolina handles differently" but it does not have a choice for this. I tried "Other Deductions from Federal AGI" but that does not have anything for this either.

As far as I can tell, Turbotax is simply ignoring this scenario. There must be other people who have similar needs.

I will keep trying. Maybe I need to start over from a blank slate

[LenaH]

Please follow these steps in TurboTax to include interest on a 1099-DIV that is tax exempt on your 1040, but taxable on your North Carolina return:

1. Open your return.
2. Search for 1099-DIV with the magnifying glass tool at the top of the page.
3. Click on Jump to 1099-DIV at the top of the search results. 
4. Click Edit next to your 1099-DIV entered.
5. Put a check mark in the box that says My form has info in other boxes.
6. Enter your tax exempt interest in Box 11, Exempt-interest dividends.
7.  On the next screen, make sure the box for None of these situations applies to me is checked. 
8. On the next screen, enter the state. 
9. Click continue. 

A mock-up return was created for this situation and it flowed correctly to North Carolina using the steps above. The amount entered that was tax-exempt on the federal side became an addition to North Carolina income. 

[Edited 2/16/2021 | 4:56 pm PST]

@mfrank

@SteamTrain - Thank you pointing this out and I agree that it would be best if this was entered from the 1099-DIV screen. 

[SteamTrain · Accepted solution]

Nope...ahs to be dealt with on the 1099-DIV itself in teh Federal section

The only thing I can think of is to delete the 1099-DIV and re-enter it manually from scratch.....don't import it....if that's how you originally got it into the software.

I have no problems with it in the Desktop software with 1099-DIV or 1099-INT forms with Tax-Exempt $$ allocated as coming from "multiple states".   I can't really check the  Online details (though I've tried...don't really want to pay for that just to test it in detail there)

[SteamTrain]

@LenaH 

I'm really uncomfortable having him/her put it on a 1099-INT....since they indicated it was on a 1099-DIV.

.....yeah...it will likely end up in the same place, but I'm just not sure what "unintended consequences " might result.

[mfrank]

SteamTrain,

Thank you! It's finally correct. I deleted the original 1099-DIV which adjusted my NC refund up to my total estimated tax paid. I then re-entered it exactly as I did the first time and after advancing the NC refund recalculated to the lowest amount I've seen so far, which was a good sign.

I then initiated a review to check the return and got a Good to go reply.

I printed the PDF and examined both federal and NC treatment of the exempt interest and both look right now. Federal is unchanged which is fine because it was correct before. The NC D-400 now has the exempt interest in the Additions line and zero in the Deductions line which is what I wanted.

I really appreciate your help. What a relief this is.

Maurice

[mfrank]

Thanks for your reply. See below for the solution provided by SteamTrain.

For what it's worth, I received a 1099-DIV not a 1099-INT

[SteamTrain]

@mfrank 

My question, is how was the original, problem 1099-DIV created?

Was it imported from Vanguard?

Was it a re-used form that transferred in empty from last year, that you just re-entered values into?

or

Was it something your created earlier yourself, from scratch??

____________________________

I'm most worried that it may have been a Vanguard import, and their 1099-DIV files may be corrupted in some strange way.  (though , scrambled imports could just happen)

[mfrank]

I manually typed in the original 1099-DIV, just as I typed in the replacement.

I've never gotten an import to work.

[rohlik]

Thank you, Maurice, for posting this Vanguard exempt-interest dividends question.  I had the same problem with it not posting as an addition to Maryland State income.  I deleted the dividend entry in my 1040 and re-entered it as noted above and now it's correct.  Like you, I always manually enter the data from my 1099s.

[mfrank]

Rohlik,

I'm glad you resolved the issue too. It was mysterious and frustrating for a long time because nothing looked like we did anything wrong.

An agent eventually advised us to delete the 1099 and re-enter it and that finally worked - even though the numbers were all identical to the first entry.

Maurice