At the Federal level, it does not matter and at the Federal level, an entry of "Various" is acceptable. However, this will then mean that you will have to make explicit entries in your state tax module to "exclude" the monetary value of dividends associated with municipal bond interest paid from municipalities in your state.
It probably is easier to do the following:
- Use the "Supplemental Tax Information" available from Vanguard for the specific municipal bond fund, and identify the percentage that is attributable to your state.
- Calculate that amount = percentage x total dividends
- First enter as if you had one Form 1099-INT for non-taxable interest using just the amount for your state and click the pull-down list to indicate your state.
- Enter as if a second Form 1099-INT for non-taxable interest was received and enter the net amount of interest after deducting the entry you made in #3 above and pull-down "various."
- That will carry the correct excludable interest into your state program.