Updating only State return for Dividends on US Govt Treasuries leads to Federal tax payable

[goyal_raj]

Hi,

I did not know that i have to specifically enter my Dividends from ETFs like SGOV which earn most of their income from US Govt Treasuries. I therefore need to amend my return since i filed already.

In Turbo tax, I went to Dividends section and when it asked about earning US Govt interest, i entered the amount and saved. It gave me a refund on my state tax but then it also created a tax payable on my Federal return. I looked at the Forms and for some reason it decreased my Total income on the form 1040 (by an amount larger than the Dividend I claimed as State exempt) but made me liable to extra tax. I did not understand why. Any idea how I can remove this extra Federal tax (and make it zero) and file just for State amendment?

thanks

thanks

[maglib]

@goyal_raj  I'm not sure how you entered it into the amended return.

When you did the amended return did you go back to where you originally entered the dividend and just update the dividend already entered and check under Do These Uncommon Situations apply?  Check to A portion of these dividends is US Government interest? Then enter amount considered US Govt. interest?  That is all you would need to do as TT knows that they are state tax free.  You would not be doing anything else other than editing what you had already input.  Indicating an amount as state tax free may be your error.

Then did you enter the amount you already paid/received to the federal government on the amended return during the interview?

Let me know

[goyal_raj]

Thanks.

All I did was (before clicking on Amend a return, which I should have done first) to go tot he Dividends sections, did not enter number there, just clicked Confirm, that took me to a page where it asked me if there was any part which is US Govt Interest; I said yes to which it asked to enter the amount of Dividend which was part of US Govt Treasuries, which I did. That resulted in a state tax refund but a Federal payment.

[maglib]

Did at any point during any fed or state interview indicate a state tax free amount vs just reporting correctly as UST interest? Check the Schedule B and see if double counted. The interest should originally be shown as federal and state taxed, then changing to selecting UST interest amount should have no impact federally. I am thinking you chose state tax free somewhere.

[goyal_raj]

I checked Schedule B and it has the original numbers only. I went ahead and removed the number I entered for the amount related to US Govt Interest and my NC state tax number came back to zero but the Federal remained as is. This is strange. I am thinking if I can delete the Turbo tax document that it creates in the Turbo Tax folder on my Desktop and replace it with the version I saved when i filed the tax. Would that be ok? I am hoping that it would show me what i was seeing when i filed.

Thanks again

[baldietax]

hopefully you kept the .tax2025 file from your filing, you can always revert to that version.  if you make an amendment save it as a different .tax2025 file otherwise you are overwriting your original return.  you should also save PDF with all forms and worksheets from original return, and same for any amended version, as your official record (don't rely on .tax files in the long term as the s/w is only supported for 4 years).

if you're seeing a change in Fed due through this process, then some other inconsistency or s/w update is triggering it which shouldn't be happening but depends what's going on in your return.  The only way to figure this out is to go through the 1040 and schedules line by line from your original return vs. the amended return with the changed Fed numbers to identify what changed and why.

[goyal_raj]

I copied the .tax file from the time that i filed the return. It showed me my original refund amounts.

Then i clicked on Amend a filed return and it took me to a page where it asks me to update the return. As soon as it takes me there, it shows a Federal tax due of 529 and a state tax due of zero without me not entering anything.

Even if i am able to find the difference, how do i get this to zero? and how do i just amend the state return and file it?

Also, this old .tax file would be overwritten with the changes i make. How do i create a new one? Should i rename this existing one to say something like _FileDate?

I looked at the form 1040X that it created and there I see some funny stuff. And i have no way to get to the details. The + sign on Forms takes me to a page which says Add this line. No other details.

Form 1040-X:

AGI - changed by a big number-  it reduced. I did not change anything on my return. But the amount it shows as Original is wrong. Correct amount column shows the amount from the return i filed. So where did it get this new number from and it calls it the original amount. This looks like TT bug to me.

Itemized deduction- same as earlier

TAxable income- went down by a big number- in accordance with the reduction in AGI

TAx amount (Shows method as QDCGTW- i reported my quarterly income earlier) - goes up by 884. How can tax go up with lower income

Other taxes- go up by 328

Total tax payable- 529 (after a refund initially when i filed).

Can anyone from TT explain this behavior? Is it because of any faulty updates? There is hardly any time left and all i want is some State refund due to the US Govt business related dividends.

thanks

[maglib]

@goyal_raj  nothing should have changed your original filing unless someone signed into your account. Do you have a printout of your original filed return or did you save it?  When did you file, the only other possibility is you filed prior to a form being finalized, now seeing that. 

You need to compare your filed return to what you are now seeing. You need to amend the original filed only.   If you had already entered this interest amount in the filed return prior  and did not indicate any was state tax free and all you did to amend was edit to indicate an amount was UST interest, the only thing that should change is your state return as UST interest is not taxable to the state. 
Always save everything and change name of file if you are working on it. 

you should only amend after your return was accepted by the IRS and state. When you do, you must also state amount you already paid or received in for the an ended return to give you only difference in what you owe. 

[baldietax]

@goyal_raj re "There is hardly any time left and all i want is some State refund due to the US Govt business related dividends." 

if you already filed you don't have to amend by tomorrow if that is the concern

sorry can't help why Turbo is going nuts on the Fed numbers, tagging some others who may be able to advise what to do

@VolvoGirl @Mike9241 @fanfare @DoninGA @SteamTrain 

[maglib]

So your fed is right. Look at your original state return and see what interest income and adjustments were. I dont do your state so not sure where adjustment for UST interest is. Something is not making sense. 100% have the original saved as a file. Then save the amended as another file name. 
i think in your original. Filing you must have indicated during fed or state interview the amount as state tax free. 

[goyal_raj]

thanks. It looks like a software update issue. It is showing a wrong AGI as my current AGI and the 'Filed' AGI as the correct AGI.

I do have the old .tax file and i loaded it. When i open turbo tax it shows my numbers from the time of filing.

I did look at the form 1040 but it seems that those forms are not amended at all. All it does is to create a 1040X form with differences and with no explanation of those differnces.

So I guess i would just go ahead and print the amended state return and try to file only the state one. Would i be able to do that?

thanks again

[maglib]

Normally you cant e-file state without e-filing fed. 

as your original return has an error, I would submit the fed 1040-x too. Sounds like you completed your return prior to a software update.