Tax exempt interest shows incorrectly on 1040

[allendalerusty]

Form schedule B shows my tax exempt income correctly. But Form 1040 or 1040-SR worksheet shows it wrong.  How do I correct this?

[AmyC]

Schedule B line 4 goes to the 1040 line 2b.

Is the taxable amount showing correctly on line 2b, it has no number, a wrong number?

Are you using desktop or online software?

@allendalerusty 

[Nitabai]

I had the same issue last year and this year again. The amount on Form 1040 is significantly lower than the amount in 1099-INT. Last year an Intuit employee asked me to reimport the 1099, but it still showed the same amount. She then asked me to send her my files which I did, but never heard back. Turbotax seems to make some adjustment to the tax exempt interest but there is no way of knowing what or why it does that.

[Nitabai]

My 1040 line 2b shows incorrect amount - significantly lower than the 1099-INT. I reimported but it again shows the same incorrect amount.

[allendalerusty]

I am using desktop version.

Interest income smart worksheet shows all the tax exempt income correctly.   This suggests the imports were correct - I checked the dividends and they were correct.   When these get transferred to 1040 in line 2a - they are substantially less - $3267 instead of $7069.  

[allendalerusty]

My bonds are from NJ and I live there.  Even though it does not impact my federal or state income tax, it will be affect my MAGI - which is used to calculate Medicare premiums

[allendalerusty]

I spoke to someone in Turbotax.  The difference in tax exempt income between the schedule B worksheet and 1040 is the bond premium.  I understand if it is tax exempt bond, the premium will be subtracted.  But if it is taxable bond, the premium has to be added.   

[Nitabai]

How would Turbotax know the premium amount as it doesnt have the CUSIP or date of purchase?

[allendalerusty]

I downloaded the tax documents from my brokerage account which had those information. 

[CATON]

Hi,

Thank you so much for this post.  I spent all day yesterday on the phone with Turbo Tax trying to get an answer as to why the exempt tax entry on line 2a of my 1040 was significantly less than the total of my exempt amount on Schedule B.  None of the 3 reps I spoke to at the time could give me a definitive answer, and some of the suggestions made would have caused me to redo major portions of my Federal and State taxes that already had been completed.  Here, in just one short sentence, you have provided the solution.

I immediately looked for the Bond Premium entry on the Summary pages of my financial statements and subtracted the Premium amount that I found on one under Interest Income from the total tax-exempt figure on my Schedule B as you suggested.  It brought me closer to the figure on line 2a, but not quite there.  Then I realized that, in my case, the tax-exempt interest on my Schedule B came from 4 different sources, including a small amount of exempt interest from a 1099-OID.  Sure enough, that also had a "Bond Premium (Covered Transactions Only)" entry, and when I also subtracted that additional amount from my Schedule B tax-exempt amount, it finally matched what was on line 2a of my 1040.

So, just as a reminder, I suggest that anyone trying to reconcile your tax-exempt figure on Schedule B with a lower figure on line 2a of the 1040, be sure to look for the Bond Premium on all documents that showed exempt interest.  I found the Bond Premium wording on 2 out of 4 of my own tax-exempt entries shown on Schedule B.

Thanks again to you and to the Turbo Tax rep who gave you the solution that you shared.

Sincerely,

CATON

[CATON]

Hi - I have a small correction.  I subtracted the "Acquisition Premium (Covered Transactions Only)" amount shown on the 1099-OID.  There was no entry for the Bond Premium. - CATON