Accrued Market Discount on Treasury bonds

[baldietax]

thanks yes I should have tagged @vryconfused who seemed to have 1099 reporting issues/questions.

the state treatment is a thorny topic, so many threads about it on here I think I replied to this one a year ago, I just do a miscellaneous subtraction in state with explanation (which some folks reported precludes e-file - I don't recall which maybe NY?).

[Robbied_isme]

After you enter a 1099-DIV you get the message "Do these uncommon situations apply". The first selection is "A portion of these dividends is U.S. Government Interest.". Why not just put the Accrued Market Discount from you US Treasury bills/notes in here, admittedly, this 1099-Div may be unrelated to the AMD position, but don't you end up with the same federal tax due AND the correct accounting for state-level deduction of this interest?

[sorka95032]

@Robbied_isme , did you mean 1099-B 1f or 1099-int box 3? I'm not aware of how treasury income would show up on a 1099-DIV?

[baldietax]

@sorka95032 Treasury income shows on 1099-DIV Box 1 from any sort of Fund/ETF holding Treasuries e.g. Money Market Funds.

@Robbied_isme solutions inputting the AMD directly as 1099-INT/DIV don't work because you can't turn off the transfer of the AMD from Sched D/Form 8949 to Schedule B.  You'd have to start manipulating 1099-B input to eliminate the AMD (set cost basis = proceeds) but now you're starting to mis-report Fed just to fix a state issue.

[Robbied_isme]

This thread is about Accrued Market Discount, which is reported on line 1f of the 1099-B

[Robbied_isme]

Let me provide more details...

In my  Fidelity account, I have both individual US Treasuries and a Federal Government Money Market Fund

Fidelity tells me 50% of the dividends from the MM fund represent U.S. government Securities

So here are the Fidelity 1099s:

1099-Div Line 1a "Ordinary Dividends" = $5,000: this is the interest income from the MM fund

1099-Int Line 3 "Interest on Treas. Obligations" = $3,000: this is from the individual  U.S. bills & bonds  

1099-B Line 1f "Accrued Market Discount" = $1,000: this is also from the individual U.S. bills & bonds

I review the Fidelity 1099-DIV and hit CONTINUE. This takes me to the screen "Do These Uncommon Situations Apply?" The first selection is "A portion of these dividends is US Government Interest."

So here I enter $3,500 = 50% of $5,000 + $1,000 (the AMD) which properly accounts for all of the interest from these positions coming from U.S. Treasury obligations

I do not alter any of the 1099s. My Federal Income Tax Due is the same whether I enter $2,500 or $3,500

But my state tax is lower when I use the correct $3,500

This seems to me the best workaround for the situation where TT does not include the AMD as US Govt interest, which should be excluded from state tax

[baldietax]

ok I see thanks for clarifying, I thought you were talking about adding a 1099-DIV.  Interesting option - I was thinking it may be limited by the % of Box 1 not designated as US Gov, but seems TT doesn't check/limit the $ amount for US Gov obligations by what is in Box 1 and will pass all of it thru to state.