BUG: Exempt-interest dividends percentage per state can equal > 100% of amount. TROWE Summit Municipal Funds is 127.8% this year, so Turbotax is stuck.

[user80966]

TROEPRICE indicates on their website that The Summit Municipal Funds breakdown per state can be more than 100%, since "the income on some bonds is exempt in more than one state". So, the individual state breakdown this year compromises 127.78% of the value.

[user80966]

Hello, original poster here. Wanted to clarify since the message subject is somewhat vague due to the limited size.

I believe I have found a bug in TurboTax. I was on the phone for almost 2 hours with different support folks tonight before being transferred to a cpa, with the understanding I'd be able explain the situation before being charged. The bug I found is preventing me from proceeding, and the hope was that the cpa would find a legal loophole to work around the technical bug. Unfortunately, the phone system wouldn't let me proceed without first paying the cpa upgrade fee. I'm not going to pay an additional fee to work around a bug. Then the system hung up on me.

The bug is simple. The income screen has a section for exempt-interest dividends from a 1099-div form, field 11. You must specify if those dividends are from one state, or multiple states. This particular fund is comprised of multiple states, and the state breakdown is the T.RowePrice Summit Municipal Funds which is found here: https://www.troweprice.com/personal-investing/resources/planning/tax/fund-specific/t-rowe-price-tax-...

At the bottom of this specific chart, there is a note that says: Note: Column totals may add up to more than 100% because income on some bonds is exempt in more than one state. 

So, after spending a while trying to enter all those individual values per state (I believe 46, including 43 states and 3 territories), the form submission errors with this message in red font:

The total amount you entered doesn't equal your reported exempt-interest dividends in Box 11 of your 1099-DIV. 

Indeed, if you add up all the values, the individual state amounts exceed the total amount on box 11, as noted on the T.Rowe website. That's probably also why Fidelity doesn't offer that when you do the automatic data import wizard tool -- it just lists the total amount, not how that value is derived per state. Because some of those dollars are shared between states, you can't quantify a specific state contribution. I suspect that error check was made for single state submissions, not the multiple state values.

And, fyi, the TurboTax site does not save "everything" as the support folks believed. Having worked in software systems, we know it will only save data that is transmitted and processed. I suspect this "Exempt" check is happening on the client side, and the server never sees it (javascript check). So, when my session times out and I then go back in to that form, I have to reenter all that data again, which takes a long time for nearly 50 entries. I've done it twice now. 

Anyway, hoping someone can report this bug to the developers, and more importantly, a cpa can answer the legal question of how to handle this situation: does Turbotax truly need to know the exact state breakdown for Exempt-interest dividends? Or is there something else I can specify so that it won't snag on the form calculation bug, while meeting any legal obligations for the IRS?

Thanks!

[RaifH]

You really only have to separate out the states and territories that are exempt from taxation in your state. I don't know what state you are in, but every state exempts its own bonds from taxability, as well as those from U.S. territories. It looks like T Rowe Price has holdings in Guam, Northern Marianas, Puerto Rico, and USVI. Those are all exempt in your state.

So I would do the math to figure out the exempt amount in your state and lump the rest into Multiple States:

1. Enter the 1099-DIV as it appears, presumably with an amount in Box 11.
2. Answer Tell us if any of these uncommon situations apply to you.
3. Answer I earned exempt-interest dividends in more than one state. Do the math to figure out the interest earned in your state and the territories mentioned above
4. For the other 49 states, select Multiple States all the way at the bottom of the pull-down menu. Enter the exempt-interest amount here as the total reported in Box 11 minus the exempt interest from your state and the other territories you already reported. This will make it add up to 100%

The interest reported as multiple states will be taxable on your state return, assuming you live in a state that taxes dividend income. It doesn't really matter which state they come from because they're all taxable by your state and not taxable federally. This will be an addition to your federal income.

The interest reported from your home state and U.S. territories are not taxable and will not be added to your state income. 

For what it's worth, I wouldn't consider this a bug in TurboTax as there's no reason you should be able to add up to more than 100% of the exempt-interest dividends reported. I would consider it a quirk of how T Rowe Price reports it. But maybe I'm biased.