TurboTax Deluxe 2021 fails to exclude interest from US savings bond in Michigan state return

[ChrisNB]

To satisfy my curiosity with accurate tax returns, I decided to compare returns from using TurboTax Deluxe 2021 and FreeTaxUSA web site.  In my particular case, I reported interest on US Savings Bonds from Box 3 in Form 1099-INT.  Here is one obvious discrepancy.  FreeTaxUSA excluded interest on US Savings Bonds in line 10 of Michigan 2021 Schedule 1 and hence, I don't owe Michigan state tax due.  Unfortunately, TurboTax Deluxe 2021 failed to exclude interest on US Savings Bonds in line 10 of Michigan 2021 Schedule 1 and hence, I owe Michigan tax due.  For this reason, I decided to file my federal and state returns with FreeTaxUSA web site.  I checked the instructions for Michigan 2021 Schedule 1 to confirm that interest on US Savings Bonds is supposed to be excluded.  I just wanted to point out this discrepancy so you can update TurboTax software for Michigan tax return.

[AmyC]

I made up a MI return using 2 1099 interest in box 3 for US Savings Bonds and it pulled through to MI sch 1 line 10. It is part of the total on sch 1 line 29 and flows to the MI 1040 line 13. I used the desktop and online versions to see if there was a difference- same results with both. Since you used the online version, you should not have had a problem. 

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions:  

1. Since you are online, go to tax tools>tools > share file with agent > 6 digit number pops up. 
2. Reply with # here and @AmyC please

[ChrisNB]

In my particular case, I am using TurboTax Deluxe 2021 as Windows application on my PC.  I am not sure how I can submit diagnostic copy.  At any rate, I have figured out the discrepancy.  I received 1099-INT form from my bank which allowed me to redeem US Savings Bonds.  Hence, the interest income is recorded in Box 3 of the 1099-INT form.  Due to fact that savings bonds were issued in the early 1980's, the interest income from the savings bond will not appear in box 3 of Part I in federal Schedule B form.  I consulted with the relevant instructions for Michigan state return and found no date restrictions on excluding interest income from US Savings Bonds.  I hope this makes sense to you.

[AmyC]

The box 3 interest from 1099-int carries to MI sch1 line 10 to become a subtraction from the MI income automatically.

US savings bond interest is tax free in every state. After entering the 1099-int, select none for uncommon situations. You don't enter the dates of the bonds or any other information. Just the amount in box 3.

You state that you received a 1099-int and the savings bond interest is correctly reported in box 3. It should carry to sch B, part 1 interest. Taxable on the federal return. That number then carries to MI, not taxable on MI.

Since yours is not carrying correctly, please go up to your black bar and select Online, then Check for Updates. Then follow these steps:

1. Please go to FORMS mode. 
2. Under sch B, go to Form 1099-int and verify the interest is showing in box 3 as it should.
3. Go up to Sch B and verify the income is showing in Part 1 interest.
4. Scroll down to MI sch 1, look at line 10. Is it still blank?
5. You can do an override to put in the correct number but that would void the accuracy guarantee. 

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

You are on desktop, go to black bar, click online > click send tax file to agent > number pops.

Reply with # here and @AmyC please.

[ChrisNB]

I finally figured out how to resolve this issue.  During the step-by-step interview for the Michigan state return, I am prompted to enter the portion of the interest and dividend income that I received while I was Michigan resident.  There is note which stated "Do not include U.S. Government interest in this amount."  When I excluded the interest income from US Savings Bonds, the correct  state tax was computed which turned out to be zero in the case of the Michigan state return.  The adjusted amount of taxable income appeared in column B of Schedule NR and the Total Household Resources Worksheet associated with the Michigan tax return.  Even though the excluded amount didn't appear in line 10 of Michigan's Schedule 1, I am satisfied with this approach as way to resolve this issue.

[1yellowdrill]

Form 1040 Schedule B box 3 interest on Treasuries amounts not transferring to state schedule 1 line 10

[1yellowdrill]

This issue is being done wrong again for TT 2022.   How do I report this to TT employees?

[1yellowdrill]

TT 2022 has the same problem as TT 2021 dealing with the box 3 interest from 1099-int that is supposed to carry to MI sch1 line 10 to become a subtraction from the MI income automatically.  It isn't working.

US savings bond interest is tax free in every state. After entering the 1099-int, select none for uncommon situations. You don't enter the dates of the bonds or any other information. Just the amount in box 3.

You state that you received a 1099-int and the savings bond interest is correctly reported in box 3. It should carry to sch B, part 1 interest. Taxable on the federal return. That number then carries to MI, not taxable on MI.

This exact problem happened to people last year.   It is happening again for the 2022 tax year.    What can be done to fix it?

[DaveF1006]

I just ran a mock return and the interest from the savings bonds is subtracted from Michigan income. It appears as a subtraction to income on Line 13 on MI-1040. and also Line 10 on Schedule 1.

@1yellowdrill 

[1yellowdrill]

I did the same and agree.   However, I'm a part time resident and it doesn't work.   I found a post from last year from a user in the same situation and he pointed me to the state explanation on how to handle it.   I have it done now.

[missjuly4th]

A