I paid accrued interest on municipal bonds reported in 1099 details. This was not imported by Turbotax. How do I apply to apply this to tax-free interest only?

[FrustratedTaxPayer]

Do I need to create separate 1099s - one for taxable and one for tax-free interest, then manually adjust the tax-free 1099?

[baldietax · Accepted solution]

exactly, you need to split the 1099 and deal with this manually.   Import does not handle adjustments like accrued interest, one reason why import can be a waste of time in this situation (and most 1099s are quick to input manually anyway).

Turbotax adjustments don't specify which income box they apply to so if you have a 1099 with multiple boxes you need to split it up otherwise the accrued will be spread across all the income boxes.

the accrued interest should be applied to the first coupon after purchase which may not apply to 2025 taxes, most brokers don't figure this out they just give you a supplementary schedule of accrued paid and it's up to you to figure it out and carry over any accrued for 2026 if you bought a bond which didn't have a coupon in 2025 (e.g. semi-annual muni purchased after the 2nd coupon payment for the year).