Tax Exempt Interest Dividends for CA

[juleyh]

My Tax Exempt Interest Dividends were imported. The correct amount shows in the Federal Return. However, there is a problem with CA. The issue is not the amount, I know which T-Ex Int Dividends are deductible for CA.

The problem is the following:

"Is any of this Interest from funds yada yada..."

There is no Interest that is Tax Exempt, period. But it shows the amount of my Tax Exempt Interest DIVIDENDS.

Then it asks same question but "Are any of these DIVIDENDS yada yada..." 

2nd part is fine, I answer "Yes" & enter dollar amount of Interest Dividends NOT exempt for CA.

Problem is that in the first part, it refers to same dollar amount as Tax Interest Dividends. I cannot & do not wish to answer Yes in Part A because there is NO Tax Exempt Interest whatsoever. That figure should be $0.

In case you want to suggest I enter the full amount as being Non-Tax Exempt, that is not accurate either. There were none, so why would it refer to my Interest Dividends, when we are talking about DIVIDENDS, not Interest? There is no reason that figure should be popping up for both questions!

[MonikaK1]

Yes, tax-exempt interest Dividends are reported on Form 1099-DIV. Even though it is interest, it may be reported on the Dividend form if it was earned on a bond. If you are looking at a brokerage statement that doesn't clearly indicate what items go in which tax information return boxes, you could contact your brokerage for assistance.

If, for example, you have US Government Interest such as from a savings bond that you redeemed, e.g., a Series EE Savings Bond and it is reported as Dividends:

• Enter your Form 1099-DIV exactly as the boxes appear in the 1099-DIV section including exempt-interest dividends.
• Click Continue
• At the screen "Tell us if any of these uncommon situations apply to you", check the box next to "A portion of these dividends is U.S. Government interest". Click Continue.
• The next screen states "Enter U.S. Government Interest". Enter the amount in the box provided. Click Continue.
• The next screen asks which state(s) your exempt-interest dividends are from. You can enter the amount for each state here. Click Done.

The Learn More link in one of these steps explains:

The U.S. government taxes income you receive on its own bonds. Your state does NOT tax income from U.S. government bonds, but each state defines government bonds differently. You should check to see if any part of these dividends is taxable in your state. This information is usually included with the 1099 you received from your broker. You may also be able to get this information from your mutual fund company's website.

Based on this information, enter an adjustment for the amount your state does NOT tax, and the TurboTax State program will subtract this amount from your state income.