In my 1099-INT Box 3 (savings bond and us treasury int = $500),. In my NC state return the figure used =$312

[vickap]

The D-400 Sch S Part B Line 18 for NC has a lower amount $312.

Why the discrepancy between Federal 1099-INT Box 3 and NC state forms.

Thanks in advance.

[SteamTrain]

@vickap 

two (or more) possibilities.

1)  Do you have $$ in box 12  ($188).   That changes the effective Federally taxable amount, and reduces the amount to be deducted from NC taxable income.

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2)  IF not that, and if you bought Muni bonds during the year, and you paid the seller accrued interest on those Muni bonds.....then...that accrued interest deduction isn't handled properly and could affect both the box 1 and box 3 values on the 1099-INT too.  IF you did buy Muni's with accrued interest you paid out when buying them, then it's best to take the box 8, and box 13 values out of that 1099-INT, and create a new 1099-INT from the same source...but reporting the box 8, 13, and accrued interest paid to the sellers...on it's own separate 1099-INT.

3&4)  Same thing for accrued interest paid out to the seller, if you bought Corporate, or Treasury bonds ...break out the box 1&11 $$, or box 3&12 $$ into their own 1099-INT before indicating the amount of accrued interest paid out at purchase for those particular bonds.

[vickap]

These are the details :

1099-INT 1 : box 1 : $27 box 3: $95 box 12 : $30.5

1099-INT 2 : box 1 : $873 box 3: $124 box 11:$5.25 Accrued interest :$ 205.5

1099-INT 3 : box 1: $1117.25 box 3: $281 box 11: $35.23 Accrued interest : $372.68

I did not have Muni bonds, only corporate and Treasury notes/bond

How does that explain the reduction in the Box 3 for NC return?

You are suggesting that I create different 1099-INT with accrued interest split for corporate and treasury bond categories.

i.e

Corporate Bond:

1099-INT1 : box 1: $$ box 11 : $$ accrued interest from Corporate Bond

1099-INT 2: Box 3: $$  Box 12 : $$ accrued interest from Corporate Bond

Treasury Bond/Note:

1099-INT1 : box 1: $$ box 11 : $$ accrued interest from treasury note/bond

1099-INT 2: Box 3: $$  Box 12 : $$ accrued interest from treasury note/bond

Could you explain the reason behind this step of splitting 1099-INT?

Will this help create more deduction for state return?

Thanks in advance.

[SteamTrain]

Yes, the accrued interest is causing the problem....

in your case, it ends up getting split proportionally between the box 1 and 3 values on a combined 1099-INT.

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But your proposal shown isn't quite right.  For each currently combined 1099-INT that has accrued interest,  (Your 1099-INT 1 doesn't need splitting...OK as-is) the others you want to split into:

1099-INT 2a: Box 1$$ and Box 11 $$; And just the accrued interest from the corporate bonds/notes

1099-INT 2b: Box 3 $$ and box 12 $$; And any accrued interest from just the Treasury Bonds/Notes.

1099-INT 3a: Box 1$$ and Box 11 $$; And just the accrued interest from the corporate bonds/notes

1099-INT 3b: Box 3 $$ and box 12 $$; And any accrued interest from the Treasury Bonds/Notes.

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Some year, TTX may program the 1099-INT entries to allow the accrued interest to be reported separately for box 1, 3 & 8...but so far, they have not.

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Then a complication to all this...is that you are not supposed to report the accrued interest on your tax return, until the year in which you actually receive income form the particular bond you purchased.  SO that if you bought a bond in (say) November of 2023, and YOU don't get an interest payment from it until (say ) Feb of 2024...then you have to wait until your 2024 tax return to claim the accrued interest paid for that bond.