tax-exempt from California state from U.S. Treasury obligations

Forum|Forum|1 year ago
March 31, 2025
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Hi there,

I have US treasury notes which were reported to IRS from my financial institution in 1099-INT (line 3) and 1099-OID (line 8). I know these are tax exempt for state of California. However, the sum of these amounts (line 3 +line 😎 is not the same as the one reported in form CA (540) from line 2 (taxable interest) in Part I Section A under column B (subtractions) . How does turbo tax determine this amount in this form. please advise. I believe this is a bug.

Thank you

baldietax

it may be a bug with import if you imported these, the solution when imported 1099s are doing strange things with state adjustments for US Gov or Munis is usually to try inputting them manually.

More usually if the state adjustment is off vs. what is expected, it's usually due to something else being picked up from Fed return, rather than a bug.

What is the difference exactly, is CA subtraction larger or smaller than the sum of your 1099 Treasury boxes?

Did you have any money market funds on 1099-DIV for which you reported US Gov interest that is also exempt in CA?

Did you have any adjustments on either form for premium (provided on the 1099 directly) or accrued interest (adjustments you track and enter yourself), then those would be subtracted from the interest amount going thru to state and you need to take into account in your reconciliation.

Note here if you did have accrued interest adjustment but have other income boxes filled in e.g. 1099-INT has Box 1, 3,8 and any of them has accrued interest adjustment, then TT can't figure which box it applies to and will pro rata them across everything which would also affect the net amount going to CA subtraction; if this applies then you need to split up the 1099-INT between income types.