Tax exempt federal income not being added back in state (Colorado) tax

[Taxpayer1010]

Hi - unlike as in past years, federal 1099-DIV tax-exempt income is not being added back in Colorado forms, and I cannot find a way to get the software to account for this.

What I have done:

* Entered "Multiple States" and "Colorado" tax exempt amounts in the Federal section. (I've already tried swapping the order of these based on last years' ticket - no luck fixing this issue.
* Completed all of the Colorado state tax entry and reviewed the forms, and unlike last year, the add-back portion is completely missing (along with a form describing this.)

I'm pretty sure this is a bug - how do I fix it or work around it? I don't even see a way to manually add the form back in that TurboTax added for me automatically last year in my state filing.

This is TurboTax Premier 2025 desktop. Also, the product support website and help system is terrible. This took me close to an hour to find a way to post/reach out. And there's still no way I can find to file a serious but report.

[Taxpayer1010]

FYI, for others - I may have found a workaround, but I am not sure yet if it will be "sticky".

First, go back to your federal return and UNDO your multi-state reporting. Choose the SINGLE STATE option and then enter "Multiple States", and enter the total quantity.

Then, go back to the State tax forms and confirm that there is now an add-back for tax-exempt bonds.

THEN, go back to federal and switch it back to multi-state, enter 'Multiple States' first and your other state 2nd with appropriate values (the reverse may work but this worked for me) and save that.

THEN, flip back to the state return forms and confirm that the add-back is now included, and that your final state tax amount is adjusted accordingly.

**This is a pretty nasty bug** that can result in the silent under-reporting of thousands of dollars to state governments by TurboTax, through no fault of the taxpayer. I hope TurboTax will fix it!

[Taxpayer1010]

Just providing a little more detail here for anyone wondering what the bug "looks like" when it's happening and you go to the forms view to check:

* On Colorado Form 104, there is no entry or value on line 9, "Other Additions, explain: ".

After switching back to single state ("Multiple States") in federal, the following shows up:

* On Colorado Form 104, there is now an entry on line 9, "Other Additions, explain: " that refers to "Other Mod Stmt", along with whatever total value you have for tax-exempt bonds.
* There is now an "Other Mod Stmt" worksheet in the Colorado docset - the title of the worksheet itself says "Other Modifications to Federal Taxable Income Worksheet"

Then, if you go back to the Federal 1099-DIV and set it back to include multiple states (Colorado + "Multiple States" as the two state-options), the form remains but is now correctly populated, and line 9 now (finally) has the correct value.

[Taxpayer1010]

I was able to get all the way to the final review with this bug happening - it wasn't being caught by any of the tax form validation logic.

[SteamTrain]

@Taxpayer1010 

The error is one I've companies about, but TTX experts haven't agreed (yet).

And it only happens with the 1099-DIV form for breaking down tax-exempt dividends.

(for a 1099-INT with tax-exempt $$ in box 8, the second button state breakdown takes precedence, no matter how the first button is set)

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The problem I've seen for the 1099-DIV, is that people have to make sure the first button "....One state..."  is set to "Multiple States".  If they had accidentally set the One State button to their home state...then that takes priority, even if they then choose the second button, and do a breakdown.

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I've added some pictures to help others:

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Here's my examples of how to do a state breakdown,  for tax-exempt $$ on a 1099-DIV form, for a supposed NC resident:

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Then the next step...but only if you want to do it.  This next step is not required, but might save some of your state taxes if your own state's bond $$ amount is significant.  For this example, the NC resident would save ~$13 in NC state taxes for his/her calculation efforts (Tax rate is ~4% for NC).