Virginia Schedule ADJ

[pgedelstein]

How can I see the source information for Virginia Schedule ADJ Line 1 (additions to income) and Line 4 (Subtractions from income)?  Double-clicking or right-clicking the cells doesn't do anything.  For both of these calculations, I cannot duplicate the calculated values from my various 1099s.  Thanks.

[baldietax]

Hi I've not found an easy way to do this.  I keep track offline of all the expected additions (usually out of state munis) and subtractions (usually Treasuries) and it usually doesn't tie out on state first time, the only thing you can really do is go back thru the 1099s driving these entries to make sure everything is entered correctly in particular any adjustments (see below for 1099-INT).  Schedule B worksheet in Forms mode has some summary grids for INT/DIV box 3/8/11 etc which at least show the details but no subtotals (from what I know on TT desktop; not sure TT online equivalent but maybe in the return PDF with 'all forms and worksheets')

Be aware if you hold individual bonds consolidated on 1099-INT with multiple income boxes (e.g. both Treasuries in Box 3 and Munis in Box 8 plus some bank interest in Box 1), and you need to make adjustments for accrued interest or premium on the bonds, then you need to split up the 1099-INT as TT cannot specify which income box the adjustment applies to and will pro-rata it across the boxes.  I usually break out VA exempt munis from VA taxable munis for the same reason.  See this recent post for more details/advice on to handle this

https://ttlc.intuit.com/community/taxes/discussion/how-do-i-adjust-interest-reported-on-1099-int-acc...

[pgedelstein]

Thanks, I'll explore.  You'd think TT would have a means for showing the calculation asit does for some other form entries.  But there I go thinking again.

[LenaH]

Line 1 & 4 of Schedule ADJ come from the following sources:

1. LINE 1: From federal Schedule B, box 8, amounts entered as tax-exempt interest with a State ID other than VA; from Schedule B, OID Interest Income Smart Worksheet, Box 1 and Box 2 if type is E and State ID other than VA or blank; from Schedule B, Exempt-Interest Dividend Smart Worksheet, amounts with a State ID other than VA or blank; and from Schedule K-1 Worksheets for Partnerships, Corporations and Estates, Tax-Exempt Interest Income with a State Name other than VA. 
2. LINE 4 : From federal Schedule B, Box 3, US Savings/Treasury Obligations plus OID Interest Income Smart Worksheet, Box 6, OID on US Treasury Obligations plus federal 1099-DIV Worksheet, Box 1a, U.S. Government Interest less related adjustments.

@pgedelstein 

[baldietax]

just to clarify on Line 1, US Territories (Puerto Rico etc) are also state exempt in VA so interest assigned to state IDs for those are also excluded here, not just VA.

[pgedelstein]

Thanks to both for your input.  After tracing everything through ( have several 1099s), I did manage to mostly duplicate the calculated Virginia additions (although I don't completely understand the treatment of bond premiums, but those are small amounts.

However, for the subtractions (Sch ADJ line 4), I discovered that my interest on certain state tax exempt federal obligations (2 Federal Home Loan Bank bonds) is not included in the amount shown.  This makes sense, since the info is not directly shown on the downloaded 1099 (there is no box for it).  The info IS shown in the detail data of the printed 1099 and noted as "not reported to the IRS."

There appears to be no way to manually add to line 4.  But according to the state's Form 760 instructions, the amounts should be included here, NOT as "other subtractions" line 6 or "other deductions" line 8.  How would you suggest I handle this?  I could manually alter the 1099, but I'm concerned that it then won't match the electronic version.

[baldietax]

do you have more info what type of 1099 (and curious which brokerage), and what box the FLHB's interest was reported in?  Sounds like it wasn't 1099-INT Box 3 which would have flowed to VA as a subtraction ok.

If these were discounted bonds and the income you're referring to is on 1099-B as an "Accrued Market Discount" in Box 1f that will flow to Schedule B but does not flow thru to state tax automatically as US Gov Interest which is a much-discussed topic, but before we go there if you have more info how this was reported that would help.

Re the premium these act as a reduction to the interest because you bought a bond at a premium e.g. if you buy a 5% muni at a price of 105 for a yield to call of 4% in 5 years from now... you will receive $500/yr but the premium will amortize $100/yr (not sure if calc is that simplistic but say it is) and your net income is $400.  If this was an out of state muni bond it's reducing your state tax by the $100.  Brokerages like Schwab, Fidelity will figure out how much premium to apply on each bond which should add up to the reported amount in Box 13.  Your cost basis in the bond is also reduced by the amount of the premium applied, so by the time the call date happens there is no gain/loss.

[pgedelstein]

I'm mixing 3 situations.

1.  The FHLB bonds are in a Fidelity account.   The interest is reported on the 1099-INT.  It is (properly) included in Box 1.  Box 3 has $0 (which is correct since FHLB bonds are not "Interest on U.S. Savings Bonds and Treas. Obligations."   The detail attached to the 1099-INT shows the specific bond and interest payments.  There are no bond premiums associated with these; I purchased as new issues.  This is the amount that I need to add to ADJ line 4.

2.  I have 2 other 1099-INTs (not Fidelity) that include amounts in Box 3.  These are properly added and the total is shown in ADJ line 4.  No issue here.

3. One of these non-Fidelity 1099s also includes bond premiums, which are properly deducted from the amount in ADJ line 1.  No issue here either.

So what I need to do is add the amount from #1 above into ADJ line 4.  I could do this by inserting the amount into the Fidelity 1099-INT box 3 (which is not really correct), overriding the amount shown in ADJ line 4 and showing some supporting detail, or some other method.  What do you suggest?

Thanks.

@baldietax @LenaH 

[baldietax]

I think 2 options:

- Enter it as Box 3 income.  Not sure IRS implications but I assume Box 1 vs. 3 adjustments happen.

- Enter an adjustment into VA state return under "Misc" then "Other Deductions from Federal Income" and you can provide explanation statement there.

Vanguard reported my FHLB interest in Box 3 so it seems the treatment can vary by broker.

I am not a CPA/Expert so this is just my 2 cents, but if this happened to me I would not lose much sleep doing a 1099-INT Box 3 adjustment for this situation.

Seen some similar posts on this problem:

https://ttlc.intuit.com/community/taxes/discussion/us-agency-bonds-minnesota/00/3582609

https://ttlc.intuit.com/community/state-taxes/discussion/e-file-minnesota-with-overrides-for-us-trea...