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Virginia Income form US obligations

Forum|Forum|2 years ago
March 16, 2024
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Virginia State: There does not seem to be a way to correctly enter income from US obligations, which is tax deductible in Virginia, but Turbotax treats as an addition rather than a subtraction.

Best answer by SteamTrain

Thanks for the response, Hal_AI.

In the past, I have always reported the interest/dividend income from US government obligations (in Virginia) by entering an adjustment to income as a subtraction on Virginia's Schedule ADJ form, which, I believe, provides Box 4 for that purpose. I normally compute the adjustment using information provided by financial institutions (in my case by Vanguard). Every tax season, Vanguard provides a form that lists the percentages of ordinary interest/dividends for various funds that originate from US government obligations. Turbotax typically allows me to enter the adjustment in step-by-step mode. However, this year, it erroneously records the adjustment entered in step-by-step mode as an addition in the Schedule ADJ form, which increases the state tax burden. I believe this is a bug in Turbotax, which I think I was able to work around by opening the Schedule ADJ form and manually making the correction. It is a pain to have to do it this way. So, hopefully, Intuit will provide an update that fixes the issue, if this indeed turns out to be a bug...

DISCLAIMER: I am not a tax expert. So it is entirely possible that I have been doing this incorrectly all along...

@Miguel-O-Matic

IF the $$ are reported by Mutual funds, and not individual bonds you hold....then those $$ are reported in box 1a of a 1099-DIV form...BUT, box 1a contains $$ from lots of other stuff too, even stocks.

BUT..

When you entered your 1099-DIV form in the federal section, did you notice that on a page AFTER the main 1099-DIV for, there is a selection box for "A portion of these dividends is U.S. Government interst" ? (Go back and edit that 1099-DIV form again.)

You select that box, and then on the next page you enter the $$ amount that YOU calculated came from US Govt bonds in your various Funds......based on the % of the distribution from that fund that the fund publishes. That should automatically include those $$ amounts as being VA -exempt on the VA forms. The total $$ in box 1a of the form 1099-DIV can come from various sources, so you have to use your supplemental sheets to determine that exact amount.

M

Miguel-O-MaticAuthor

I was able to work around the issue by opening the "Sch ADJ" form and manually correcting the erroneous entries made by Turbotax in the Step-by-Step mode.

Hal_Al

Employee

U.S. Treasury interest must be entered in box 3 at the 1099-INT screen. When it is entered there, TT will automatically make the deduction on the state return. There is no other way to make the adjustment.

Be sure that the US Treasury Interest in entered in box 3, at the 1099-INT screen. When you first see that screen, check the box "my 1099-Int has more than just a box 1", to get access to box 3.

M

Miguel-O-MaticAuthor

Thanks for the response, Hal_AI.

In the past, I have always reported the interest/dividend income from US government obligations (in Virginia) by entering an adjustment to income as a subtraction on Virginia's Schedule ADJ form, which, I believe, provides Box 4 for that purpose. I normally compute the adjustment using information provided by financial institutions (in my case by Vanguard). Every tax season, Vanguard provides a form that lists the percentages of ordinary interest/dividends for various funds that originate from US government obligations. Turbotax typically allows me to enter the adjustment in step-by-step mode. However, this year, it erroneously records the adjustment entered in step-by-step mode as an addition in the Schedule ADJ form, which increases the state tax burden. I believe this is a bug in Turbotax, which I think I was able to work around by opening the Schedule ADJ form and manually making the correction. It is a pain to have to do it this way. So, hopefully, Intuit will provide an update that fixes the issue, if this indeed turns out to be a bug...

DISCLAIMER: I am not a tax expert. So it is entirely possible that I have been doing this incorrectly all along...