Error on Interest adjustment for tax exempt bond premium

[Rockyjrc]

I'm using Turbotax Premier.  I have tax exempt bonds from my home state Michigan, and one from Arizona.  All have Box 13  premium amounts (amortized) which are less than the Box 8 interest for each.  I entered these by creating a separate 1099-INT worksheet for each bond. I entered the box 8 interest and box 13 premium amounts as positive numbers. Next, I checked "we need to adjust the taxable amount." Next, I choose Michigan and Arizona for each respective bond.  I do not check "I earned tax exempt interest in more than one state" because I'm doing a separate 1099 INT for each bond, and when I tried that there was no way to break out the bond premium for each bond or even by state. Next, on the "Report Interest Adjustment" page, I enter the amount from box 13 as a positive number in the "Adjustment" box and check "I amortized a premium I paid on a tax exempt bond."

But in Federal Review I get one error for the Arizona 1099 INT.  I do not get this error for the Michigan bonds even though the information is entered exactly the same on all of them. The error says:

Schedule B – Form 1099-INT: Bond premium tax exempt. The total bond premium adjustment of 1446.44 reported on this form 1099-INT is greater than the related Box 8 tax-exempt interest of 1000.00.  You must reduce the bond premium amount reported on this 1099-INT to the amount of Box 3. Any excess amount is a nondeductible loss.

The bond premium amount on this bond is 723.22.  I entered that amount in box 13 and in the Interest Adjustment box, same as for the respective amounts on the Michigan bonds.  It's saying I reported the interest adjustment at double what I reported.  It is asking me to change it to the amount in box 3 (zero), which makes no sense.  If I do that I lose the error but I also lose the interest adjustment on my state tax return. This seems like a bug in the program. I've searched everywhere but have come up empty. Several posts say to do just what I'm doing. I'll probably just finish the return with the error; pretty sure the amounts flowing into the respective forms are correct.  Any ideas?

[Rockyjrc · Accepted solution]

Problem solved!  The trick is that you do not click "we need to adjust the taxable amount" box.  The program already automatically adjusts the interest by subtracting the bond premium in box 13 from the interest in box 8. Good thing I did not try to ignore the error message.  When  looked at the forms, the amount for tax exempt interest on both the federal return and state return were wrong.  I went back and deleted the respective 1099 INT forms and started over, one by one, checking what happened in the forms as I went.  I discovered that by not checking the "we need to adjust  the taxable amount" and not entering a taxable amount adjustment, I got the correct numbers on the forms.