ghaber
Level 3

Taxpayer, a trust, received a Form 1099-INT reporting interest received that included a source that is taxable for Federal income tax purposes, but exempt from California income tax.  Can this be entered on the Form 1041 Schedule 1099-INT Worksheet so that the proper amounts will flow to the Federal and California tax returns or does an adjustment have to be made on the California Form CA-541 and, if so, where would that adjustment be made in ProSeries?

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Just-Lisa-Now-
Level 15
Level 15

Ctrl+F  99i 

theres tax exempt interest that you enter the state.


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ghaber
Level 3

Thank, Lisa.  However, I'm not sure if I explained the problem correctly.  As an example, the client received a Form 1099-INT showing $1,000 in Box 1. This will flow the $1,000 to the state (California) tax return.  However, of the $1,000, the sum of $900 was from California bonds that are taxable for Federal Income Tax purposes, but Exempt from California in come tax.  The solution you suggested will not work in the example I just provided.

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sjrcpa
Level 15

Why is CA bond interest taxable on the federal return?


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Just-Lisa-Now-
Level 15
Level 15

So box 1 has 1000, which box is the 900 in?


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ghaber
Level 3

Herre is a link to the definition of taxable municipal bonds: https://www.investopedia.com/terms/t/taxable-municipal-bond.asp

 

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ghaber
Level 3

The 900 is included in the 1,000.  This is an area not generally understood, or, for that matter, rarely seen by tax practitioners.  Here is a link that may help in understanding the nature of this interest: https://www.investopedia.com/terms/t/taxable-municipal-bond.asp.

 

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