Turbo Tax - Tax-Exempt Income not added to State Return

[Felix Mulier]

This may be more of an observation than a question, but here goes.

I used TT this year for the first time. I feel like I've been dragged through the mud! I followed the Step-by-Step method, but didn't have that "warm and fuzzy" feeling that everything was OK. (I hate black boxes!)

For example, they would ask for $ amounts, but provided no ready place to enter details (You can "show" the relevant form, but can't edit it in this mode). I went through their "Review" step and they said "Congratulations! blah, blah blah! (Would you like to buy audit support for $60?)"

So, then I did my own review using the Forms mode and discovered that, for example, my Tax-Exempt Dividends (which are not exempt on my State return) were not carried over to that form. I dug around and found the "Smart Worksheet" where that information is stored, along with the correct State code, so I'm not sure why it didn't carry over to the State form.

Also, dividends from one of my funds do qualify for State tax-exemption, but only 98.41% of it. I could swear I added that amount somewhere, but I can't find it. TT actually did enter an amount for this, but entered 100% of it. It won't let me change the amount on the form. I'll keep looking for another worksheet.

Bottom line, beginning with this quarter's estimated taxes, I'm going to skip their Step-by-Step and go straight to the Forms.

Thanks for listening!

P.S. I looked around for a good tutorial on using TT - didn't find anything. If there's one out there, I'd be grateful for a link!

P.P.S. Thanks for the thread on not filing too soon. I'm going to put this away now for about a month!

[ERD50]

I'm also not warm-fuzzy with these programs - as you say, they seem to be getting more like a 'black-box' each year.

I've always done my taxes myself to have a better understanding of what is going on, what influences what, etc. But if you just enter numbers, you don't really get that. And running through their interviews ends up with a zillion questions unrelated to anything I do. But then I'm afraid I'll miss the one question that is relevant.

It does seem better to go through the forms, based on what was needed last year, plus anything unique. But with all these complex rules, who knows?

For example, from my past experience I know that certain deductions may be limited (maybe I don't hit the threshold). The interview would have you enter all the details, and I don't think you'd even know you wasted your time. So I know to throw in an estimate, see if anything changes, and then go enter the details if it's worth it.

[rant] I think everyone in Congress, the Prez and the Supremes should be required to do their own taxes, locked in a room with only the same resources that are available to the average taxpayer. They can wait on the phone for the Fed tax help line like everyone else. And if they think they need a tax program, then they should have to pay, out of their own pocket, for tax software for every one of their constituents. Their actions have consequences, and it is costing each of us in time and money. For needless complexity. [end rant - for now ]

-ERD50

[rbmrtn]

I don't use TT, but generally the input is the same. Check the individual 1099 form in the program. There is box to specify what portion of BOX 10 ( tax exempt interest dividends) is exempt from state tax.

[Dimsumkid]

Turbotax's version of a tutorial is "Easy Guide" driven. When you need more info, TT wants you to use the Help Center (upper right corner of the page). I've found that you need to type in your question to get the best result. For your specific topic, type in "Enter a Portion of a Dividend or Interest That Is State Tax Exempt".

I've found TT was difficult to navigate when trying to buy extra I Bonds last year when I was getting a small refund. Had to trick the system by asking for an extension to file and filing the over payment to max out the I Bond purchase. TT would flag this in the error checking since it just wants to figure out your tax bill.

[Animorph]

TT is pretty weak on state taxes. I've also had fun in the past with the AMT section. Both will just flat out ask you "do you need to make any adjustment to this for AMT/State?" Then it's back to the IRS instructions and publications to figure out why I might need to adjust anything.

Just like any financial advisor, it works best if you already know what you're doing.

[target2019]

Using TurboTax for the first time. For last 7 years I've been using Intuit ProSeries, but needed to begin a switchover this year. I was not impressed with the Step-by-Step method of TT.

What I am doing is referring back to last years PDF prepared with other software as I enter each significant piece into a worksheet or supporting statement, and looking for the flowdown of data.

[pb4uski]

I only use the forms. The step-by-step is way too slow for me. But I used to prepare taxes for a living (but about 40 years ago) so I am familiar with the forms.

[Original Wally]

Quote:

Originally Posted by pb4uski I only use the forms. The step-by-step is way too slow for me. But I used to prepare taxes for a living (but about 40 years ago) so I am familiar with the forms.

+1 - having the tax background make it way easier. I still have a half-dozen clients that I prep for. I generally do straight form input. But I still sometimes wander thru the interview, just an extra level of "did I catch everything".

[fritz]

Quote:

Originally Posted by ERD50 I'm also not warm-fuzzy with these programs - as you say, they seem to be getting more like a 'black-box' each year. I've always done my taxes myself to have a better understanding of what is going on, what influences what, etc. But if you just enter numbers, you don't really get that. And running through their interviews ends up with a zillion questions unrelated to anything I do. But then I'm afraid I'll miss the one question that is relevant. It does seem better to go through the forms, based on what was needed last year, plus anything unique. But with all these complex rules, who knows? -ERD50

+1 Always do my own taxes and use TT, but utilize our state's online filing even though I get state with TT Fed for free. I caught an error I was about to make this year using the state online when it came out with a different amount owed than TT (had to do with taxable income that's state exempt). Found my error reviewing TT state forms vs. the state online. Very easy to do an input error and not know it, when you just put an amount in a box and are not reviewing the actual forms.

[ERhoosier]

No idea if this is related to OP's issue, but using any tax software I always wait until March & download all the latest updates. I cannot ever remember a tax yr where those updates were not critical.
And +1 to carefully rechecking those state returns. Hard enough to keep up with the latest Fed tax changes, let alone 50 individual states (plus DC).

[lucija]

Quote:

Originally Posted by Felix Mulier <snip>... So, then I did my own review using the Forms mode and discovered that, for example, my Tax-Exempt Dividends (which are not exempt on my State return) were not carried over to that form. I dug around and found the "Smart Worksheet" where that information is stored, along with the correct State code, so I'm not sure why it didn't carry over to the State form. Also, dividends from one of my funds do qualify for State tax-exemption, but only 98.41% of it. I could swear I added that amount somewhere, but I can't find it. TT actually did enter an amount for this, but entered 100% of it. It won't let me change the amount on the form. I'll keep looking for another worksheet....<snip>

Felix, I can relate. I had the same exact problem, checked the actual forms after finishing 1099-DIV input and found out that tax exempt divs not showing up on state return.

TT sucks, but here's what you have to do to make it understand.

+ Open TT, select Fed taxes and go under "explore on my own"
+ scroll down and select "update" 1099-DIV
+ select "edit" for the 1099-DIV with the problem (or input new one)
+ input 1099-DIV with your information, AND add the additional info in the "state source of exempt dividends". To make the amount 100% state taxable select "more than one state". If only a portion of the 1099 is state taxable, you will need to input 2 1099-DIV entries (one with amount state taxable as above and another with your state in the pull-down box)

Hope that helps.

[explanade]

How are people faring with the 1099s?

I imported most of them, including from Vanguard.

But they ask you questions after each form, especially the ones with foreign income and on which foreign taxes were paid.

Like they ask how much of the dividends reported on the form was foreign income and this info doesn't seem to be readily available from most institutions.

Then they ask about which countries did you pay taxes to and that info isn't always readily available. There is an option to put in regulated investment company or RIC, which presumably would be applicable to all funds which invest in international companies?

[Original Wally]

Quote:

Originally Posted by ERhoosier And +1 to carefully rechecking those state returns. Hard enough to keep up with the latest Fed tax changes, let alone 50 individual states (plus DC).

+++1 Always Always double check your input.

If nothing else, go thru the interview again and verify what you did.

[Animorph]

Quote:

Originally Posted by explanade How are people faring with the 1099s? I imported most of them, including from Vanguard. But they ask you questions after each form, especially the ones with foreign income and on which foreign taxes were paid. Like they ask how much of the dividends reported on the form was foreign income and this info doesn't seem to be readily available from most institutions. Then they ask about which countries did you pay taxes to and that info isn't always readily available. There is an option to put in regulated investment company or RIC, which presumably would be applicable to all funds which invest in international companies?

You can usually get the foreign income percentage directly from the fund family websites. TT does have an option to use RIC, though it's always a pain to figure out how to do that each year. I haven't done it for this year, so no clue at this time. I haven't figured out how to do that for my state taxes, which always want to know each country. I'm not going to list 100 countries for the small state tax savings.

[explanade]

It's a checkbox in TT 2012. That is technically correct right, if you get this foreign income through a mutual fund or ETF, the payer is an RIC?

[Animorph]

Quote:

Originally Posted by explanade It's a checkbox in TT 2012. That is technically correct right, if you get this foreign income through a mutual fund or ETF, the payer is an RIC?

I believe so. I researched it pretty well a few years ago, but now I just follow last year.

[meierlde]

Actually the foreign income shows on the 1099. If you use forms mode you can input it.

[Brat]

My nephew taught school in Spain for much of last year, then moved back to the states where he worked. He would like to use my TT to prepare his return. Any heads up for that situation?

[Felix Mulier]

Quote:

Originally Posted by Felix Mulier Dividends from one of my funds do qualify for State tax-exemption, but only 98.41% of it.... TT actually did enter an amount for this, but entered 100% of it [on the State tax form]. It won't let me change the amount on the form....I'm going to put this away now for about a month!

How quickly time flies! I figured out how to do this for 1 state using only one 1099-DIV entry (but thanks lucija for the suggestion of setting up 2). Don't know how this works if you're filing returns in more than 1 state, but this worked for me.

Working directly on the TT federal 1099-DIV Worksheet for the fund, enter the following:

• Box 1a - "Total ordinary dividends": total ordinary divided income received from this fund
• Box 1a - "Total U.S. government interest, if any, included in Box 1a": amount that the State considers exempt from taxes (in my case, I multiplied the first figure by 98.41%)
• Box 11b - 100%
• Box 12 - state code

(Anybody remember pseudo-code? ) This basically tells TT to "Take 100% of the amount on the 2nd line in Box 1a and enter that as "Interest income on U.S. Government bonds" on the state form.

I figured this out while I was on hold with TT support for 1 1/2 hours! I knew I was in trouble when the first person asked "Did you enter everything correctly?" And then asked "A ten-ninety-nine what?"

Anyway, it's done. Hope this is helpful to someone else.