Part year resident in 2 states, Turbotax does not allow apportionment of U.S. Obligations between 2 states

[BiBi3]

I entered the amount of U.S. Obligations into the Federal TurboTax Deluxe. TurboTax then automatically populates the entire U.S. Obligations amount into both states (I am a part-year resident in both states). I should be allowed to apportion the appropriate portion of the U.S. Obligations to each state, but TurboTax does not query for or allow apportionment of U.S. Obligations. Instead it automatically enters the entire amount into both states. I think this is a bug that needs to be fixed.

[JohnW152]

What states are you working with?  

States compute income tax differently.  

Some start with the entire federal income amount and proceed with additions, subtractions and/or credits that are unique to that state.

Other states start from scratch, then add income, deductions and credits from there.

How TurboTax is computing your state returns depends on which states you’re filing returns for.

[BiBi3]

The entire U.S. Obligations amount is subtracted from each state's income regardless of whether the state starts from scratch or starts with entire federal income. The point is that the U.S. Obligations are calculated (by the user) from dividends, and the dividends are apportioned between the two states, based on state of residence when dividend is received. Therefore the U.S. Obligations associated with the apportioned dividends should be likewise apportioned, and TurboTax does not query for this, or calculate it, or even allow the U.S. Obligations amounts to be changed in the forms view. Please inform me how to apportion the U.S. Obligations amount in each state, or fix the bug. Thank you.

[MaryK4]

Can you clarify which states? As part of the investigation process, we have to submit a specific example.  @BiBi3

[BiBi3]

The states are GA and MD. Please fix this bug before 2021 taxes are due.

[BiBi3]

Can a TurboTax expert please reply? It is important to properly apportion the amount of U. S. Obligations between GA and MD state returns. I have called TurboTax support to no avail, and was told the only way to have this bug fixed is to report it here. So please don't drop this thread.

[DianeW777]

 First, you may need to clarify what you mean by US Obligations.  Any US bond interest would not be taxable on any state return. That being said, the following steps should help you remove income you believe should not be part of each state.  Be sure to Preview each state return after you complete the entry.

When you are moving through the Georgia (GA) return, you reach a screen titled: 'Here's the income that Georgia handles differently'

1. Under Miscellaneous > Select Other subtractions from GA Income > Enter your description and amount

When you are moving through the Maryland (MD) state return you will see it is automated with no intervention, however you have the ability. See the images below for each state.

Please update here is you can provide more details about your situation.

[BiBi3]

Thank you, the workaround provided a way to apportion the U.S. Obligations for correct subtraction from income in GA and MD returns.

To summarize to problem:

1) The total amount of U.S. obligations is entered into the Federal tax review. U.S. Obligations are not taxed by states so should be subtracted from state income.

2) TurboTax automatically enters the entire U.S. Obligations amount into both GA and MD returns, even though part year resident in both states. It is not possible to apportion U.S. Obligations amount for each state, nor is it possible to apportion in forms view.

To summarize the workaround:

1) In the Federal review, enter only the apportioned U.S. Obligations amount for MD.

2) Then TurboTax automatically enters the correct (apportioned) amount into the MD return.

3) TurboTax also automatically enters the apportioned amount into the GA return. In GA, enter the amount needed to reach the correct apportionment under Adjustments and label it U.S. Obligations. This results in two GA U.S. Obligation lines (Schedule 1 Line 10 AND Line 12) that combined reach the desired amount.

This gives the correct apportioned U.S. Obligations amounts in both states, although a kludge. 

This IS a bug in TurboTax that needs to be corrected. The bug is that the U.S. Obligations are automatically put into the state returns for part year residents, when it should be possible to correctly apportion the amounts between the two states.

[dhm37]

Has this been improved for Tax Year 2022 ?

As a part-year resident of MN and WI, how to I apportion this between these 2 states ?

[ErnieS0]

File part-year income tax returns for Minnesota and Wisconsin.

Report on your MN return, the amount of income you earned or received while a resident of Minnesota and do the same for Wisconsin.

If your worked the same job, your W-2 should split your income between the two states. If you worked different jobs, you should have W-2(s) for MN and WI.

You'll have to figure out how to split other income such as interest, dividends and capital gains according to the date you received the income. If you received the income while living in MN, report it to MN and do the same for WI.

TurboTax will add MN and WI part-year returns to State Taxes. On State of Residence in My Info tell TurboTax that you lived in more than one state.

There are sections in both MN and WI that will ask you to split your income.

If you don't see the state, tap Add Another State in State Taxes.

@dhm37

[dhm37]

My issue is NOT related to SPLITTING INCOME sources between the 2 states .............. my issue is How do I apportion/split the subtraction of mutual fund dividend income that is derived from US obligations that are not taxable at the state level ?  Maybe an example will help.  Imagine that I have $12,000 of mutual fund dividend income, of which $8000 is assigned to MN and $4000 to WI.   Of that $12,000 dividend amount, $600 was from US treasury securities within the mutual fund dividend.   That $600 is used to reduce the taxable income at the state level.  The $600 needs to be split between MN ($400) and WI ($200).  Turbo Tax applies the full $1200 to both MN and to WI, which is not correct - I need a way to apportion/split the $1200 between the 2 states.   I cant find a way to make this split - please advise on how to do this.   Thanks.

[JosephS1]

This may not be the most ideal way to accomplish what you need but have you considered entering the 1099-DIV as 2 separate entries - 1 for each state that it pertains to?  If you are concerned with keeping track of the entries via account number, just add an additional 1 or 0 to the end of the account number where called for in the entry area.  In the example above which you gave, enter the 1099-DIV as 2 separate items - 1 for $8,000 to MN and 1 for $4,000 to WI, with the associated items tax- free treatment for each.  It may not be ideal but it should accomplish what you desire.

@dhm37 

[dhm37]

Continuing with this example, my overall dividend/interest is $15,000.   Of which $3000 has no associated US Treasury portion to exclude, and lets say $2000 of that belongs to MN and $1000 to WI.   When I allocate total dividend/interest between the 2 states, I just enter a $ amount - I dont see how TT knows whether to pull the exclusion amount from the $8000 vs $4000.  

[RobertB4444]

When you are doing the two state returns you will have to enter those amounts as exclusions from your income in the respective states.  You are correct, there is no way for TurboTax to properly calculate that so you will have to manually exclude the income that is not taxed by those states.

Just as a heads up - Minnesota defines a full resident as someone who spends 183 days in the state and Wisconsin defines a full resident as someone who maintains their legal residence in the state.  Usually you qualify as a resident of one state and a part-year resident of a second because one state is your primary home.  I suppose if you are in each state for 178 days in the year and don't maintain your legal residence in Wisconsin you qualify but part-time residence in both is pretty tricky.

@dhm37 

[crash345u]

I realize this is an old thread but this exact  problem still existed in 2023 tax return for the state of MA (inability to make adjustments for part year resident US interest obligations). I would simply like to document for  anybody else struggling with this issue that not only did I post this problem in 2023, but I  consulted by phone with "Turbo Tax Experts" who acknowledged the TT bug, but it still has not been resolved. I ended up having to get a refund from TT for the tax program and I filed with an alternate tax software which handled it perfectly.

TT obviously has a problem dealing with part year resident State returns as it relates to US Treasury Obligations. TT if you are listening please fix this once and for all for all states.

where-is-the-ma-state-part-year-question-to-make-adjustments-for-interest-from-us-obligations/01/327...