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WestonT
Returning Member

Tax Exempt Interest on Kansas Income Tax Return

I completed my 2022 federal and state (Kansas) income tax returns. Before filing them, I compared my 2022 returns to 2021. For both years I received tax exempt interest from a state/municipal bond fund which was reported by my brokerage firm on 1099-DIV. For both years, the exempt interest was from multiple states and Kansas was not listed in either year. On my 2021 Kansas IC tax return, the tax exemption interest was added to my Kansas taxable income, however, on my 2022 Kansas IC tax return the tax exempt interest was not added back as taxable income for Kansas. Why were the tax exempt interest amounts handled differently in 2021 versus 2022? Thanks!

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2 Replies
RalphH1
Expert Alumni

Tax Exempt Interest on Kansas Income Tax Return

There is no reason in the tax rules for this scenario to be handled differently this time. If the interest is not from an obligation of Kansas or one of its subdivisions, it should be added back on line A1 of your Schedule S (like what you’re seeing on the 2021 return).

 

You may have already done this, WestonT, but returning to the 1099-DIV screens (in “Wages & Income” of the federal part of TurboTax) to double-check things is step 1 here. We want to make sure that “None of these apply” is checked on the “Tell us if any of these uncommon situations apply” screen (after the actual 1099 entries), and then that the multiple-state entries are correct on the “Which state is your interest from?” screen (with no sign of Kansas there, of course). 

 

That configuration should put the number where it goes on the Schedule S. But if it isn’t happening, it looks like an issue that can usually be fixed with a little tweaking. I would first delete that particular 1099 entry (on the “Here’s the interest we have so far” screen), then select “Add interest income” and add it back. 

 

If that doesn’t work, you can go to “forms mode” if you’re using TurboTax Desktop (or to “delete a form” in the online software), and delete the 1099-DIV there. This is just a different way of doing it, attempting to clear out whatever data has become problematic.

 

@WestonT, I think I’ve answered the tax part of your question, but of course your problem isn’t solved yet — please repost with an update (ideally with news that the interest is good and you’re filing, but if not, I or someone else can resume helping you work toward a solution…).

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WestonT
Returning Member

Tax Exempt Interest on Kansas Income Tax Return

Hello RalphH1! I went ahead and deleted the 1099-DIV that I was having problems with and re-entered the data. It worked! The exempt interest dividends showed up on line A1 of my KS Schedule S. Thanks for the help!

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