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TT is not handling excluded treasury obligations properly when I moved to a second state

TT is excluding ALL of the treasury obligations that I entered on the federal return from BOTH state returns.

Example: on federal return I entered $1000 DIV income was from US Treasury obligations.

 

I lived in MA 7 months and NC 5 months but both State returns are showing $1000 to be excluded. I know how much each state should exclude based on the timing of the distributions but TT uses the entire amount from the federal return for each state.

 

I think I should remove the excluded amount from the federal return and hopefully each state will ask me what specifically to exclude??

 

 

 

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4 Replies
MonikaK1
Expert Alumni

TT is not handling excluded treasury obligations properly when I moved to a second state

If you entered correctly in the Federal section that $1,000 (for example) of DIV income was for Treasury obligations, then don't change the Federal entry.

 

Each state return interview has a section for you to make adjustments for any income items that are different for that state. Make any appropriate adjusting entry in the State return.

 

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TT is not handling excluded treasury obligations properly when I moved to a second state

I don't think you  understood the problem. Turbo Tax is NOT GIVING ME THE OPTION to change the exclusion of $1K for MA and $1K for NC (which I did enter correctly on the federal return). The federal return which contains the $1K exclusion is carrying over to BOTH states and there is no way for me to change that number. TT is entering $1K on Line 1 of MA Form 1, 1-NR/PY Schedule B Excluded Statement  which is NOT CORRECT and there are no "adjustment" questions which will change this number.

 

TT will allow me to make adjustments to exclude more for each state or to add more income for each state, but the $1K from federal return carries over to BOTH state returns with NO CHOICE. If I did what you suggested, I would show for MA that I am excluding $1K but would then have to add back income because TT is allocating too much exclusion for each state. This is the only question I get for the MA return relative to adjustments: Do you have any additional interest or dividend income to report or any to exclude? The problem is the is NO OPTION to change what the federal return is carrying over for the exclusion. There was an additional question that allowed me to adjust the total federal dividends so they applied only to MA.

 

The only way I have found to correct this is to NOT ENTER any exclusion on the federal return, and then add the proper adjustment when asked for an exclusion for each state.

 

 

 

MonikaK1
Expert Alumni

TT is not handling excluded treasury obligations properly when I moved to a second state

Is the 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? If so:

 

  • 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.

Interest income from Treasury bills, notes, and bonds is subject to federal income tax, but is exempt from all state and local income taxes. See this IRS webpage for more information.

 

When you lived in more than one state during the tax year, you should prepare the earlier nonresident/part-year resident state return first and then the return for the state where you lived at the end of the year, to get correct results. If you prepared them in the wrong order, you can delete them and start again.

 

Different states treat the income allocation calculation differently. Complete the TurboTax interview for the earlier state, and make the correct interest income adjustment where prompted. When that return is complete, then complete the state interview for the later state.

 

See this TurboTax help article for more information about splitting income between states.

 

I will update my response to your similar question in another thread. I had initially thought this was reported on a 1099-INT. I apologize for any inconvenience.

 

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TT is not handling excluded treasury obligations properly when I moved to a second state

I am using the ONLINE version and the question highlighted below does not appear during the federal return interview. I did enter into TT that I lived in two states. The TT questions for excluding income terminates after I click continue at the 4th bullet below  (Enter US Government Interest )

 

  • 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.

******* I AM NOT PROMPTED FOR THE LAST BULLET *******

 

There is no prompt in the MA state return to change the exclusion amount carried from the federal return, and the Online TT federal program DOES NOT have the prompt asking "which state(s) your exept-interest dividends are from". Please dont say to use the Desktop version I don't want to switch I just want to use TT to do my taxes properly.  There must be a way to do this in the Online version. I think the solution is not to enter any exclusion amount in the federal return and exclude/allocate in both MA and NC state returns. Otherwise TT is forcing 100% of the excluded amount entered in the federal return into both MA and NC with no way to change it.

 

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