Agency bond state exemption adjustment

Parox
Parox Member Posts: 5 Newcomer
in General

On various threads on the internet it's discussed how FTU supports state-exemption for 1099-DIV but there is no option for 1099-INT via interview questions.

The "trick" that TaxAct and others recommend is to modify box 3 to accommodate the agency bond interest (assuming you have an agency bond that is state-tax exempt!). However, various sources warn that it could mess up federal.

I have confirmed with TaxSlayer (which does support state-exempt interest no reported in box 3 via an interview question) that modifying box 3 is the same as how TaxSlayer handles it and it creates no difference federally nor my state (MI).

I hope FTU adds the feature they have on 1099-DIV to the 1099-INT form to allow us to specify state-exempt interest in the future, such that you don't have to fiddle with box 3 and box 1 as it is reported (Similar to TaxSlayer)

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  • Parox
    Parox Member Posts: 5 Newcomer

    As a side note, some institutions correct report agency bond interest in box 3 (vanguard) but I can confirm Fidelity does not! Arguably, based on the wording of box 3 this is not incorrect - that is why FTU needs to accommodate this scenario with an interview question and feature

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 901 image
    Hi Parox,

    Thank you for your contribution. Our software does support state exemptions for a 1099-DIV, however it may be limited depending on your situation and we don't have a way for you to manually adjust entries.

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