2

On line 2A, a tax payer must report his/her tax free income without any detail.

I believe this number is computed by summing up all the values for tax free income on the 1099s. This number appears on line 8 for the 1099-INT. You then add to that the values on line 11 of the 1099-OID. You then subtract the values on line 6 of the 1099-OIDs.

Do I have that right? The reason I ask is that I am doing a tax return with TurboTax and I do not understand the number that TurboTax is producing.

Note: I live in the United States

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  • 1
    Is it possible that line 6 from 1099-OID is not relevant to tax-exempt income? Does TurboTax simply sum line 8 from 1099-INT and line 11 from 1099-OID? Feb 22 at 17:10
  • @OrangeCoast-reinstateMonica All the entries on the 1099-OID are related to tax-exempt income. Turbo Tax is not simply summing line 8 from 1099-INT and line 11 from 1099-OID. The number it gets is smaller than the number I calculate.
    – Bob
    Feb 22 at 17:47
  • That's exempt interest, which includes OID and acquisition discount because (for bonds) those are imputed as interest. There are many other kinds of exempt income that aren't interest and don't go on 2a: excluded foreign earned income, combat zone pay, Medicaid waiver (foster) payments, workers comp (and FECA), (most) disability and welfare, some forgiven debts, etc. Feb 24 at 5:32
0

If TurboTax is using a number smaller than you expect, it is either not picking up one of your entries, or it is subtracting out one that you are not expecting. You can narrow the possibilities down by temporarily changing some of your entered values (on the 1099-INT or 1099-OID) and seeing what effect that has on line 2a of the 1040.

The most likely case is that TurboTax is subtracting out a value. Looking at the Line 2a instructions for the 1040 (https://www.irs.gov/pub/irs-pdf/i1040gi.pdf), it mostly matches your expectations.

In general, your tax-exempt stated interest should be shown in box 8 of Form 1099-INT or, for a tax-exempt OID bond, in box 2 of Form 1099-OID and your tax-exempt OID should be shown in box 11 of Form 1099-OID. Enter the total on line 2a.

So that's box 8 of the 1099-INT and box 11 of the 1099-OID.

Digression

But why do they mention box 2 of the 1099-OID? Box 2, as labeled, doesn't seem to be tax-exempt. But the instructions for box 2 say this:

If there is an amount in both boxes 2 and 8, the amount in box 2 is interest on a U.S. Treasury obligation and is exempt from state and local income taxes. If there is an amount in both boxes 2 and 11, the amount in box 2 is tax-exempt interest and is not included in interest income on your tax return.

So if you only have a value in box 11 of the 1099-OID, the first impression is that line 2a of the 1040 should contain the sum of box 8 from the 1099-INT and box 11 from the 1099-OID. But wait! There's more. Those instructions for line 2a go on to say:

However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line 2a (that is, the excess of the tax-exempt interest received during the year over the amortized bond premium for the year). Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a (that is, the excess of tax-exempt OID for the year over the amortized acquisition premium for the year).

So those are the most likely things being subtracted out. The bond premium, which is in box 10 of the 1099-OID, and the acquisition premium, which is in box 6 of the 1099-OID.

If you subtract the values in those two boxes, you should get what TurboTax gets.

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  • Tax free interest is not reported on Schedule B. In addition, there is no detail on the tax return for tax free number. That is, only the total is reported.
    – Bob
    Feb 24 at 2:38
  • What about Box 13 of the INT. That box says: Bond Premium on Tax-Exempt Bond. It seems to me that value should be subtracted off. Please comment.
    – Bob
    Feb 24 at 3:39
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    About Schedule B, you are correct. I only mentioned it because the quoted text ("In general, your tax-exempt ...") is in the instructions for both the 1040 and the Schedule B. I'll remove the reference to Schedule B because it doesn't add any value.
    – Doug Deden
    Feb 24 at 16:23
  • 1
    As for box 13 of the 1099-INT, the instructions say "If you reported a net amount of interest in box 8 or 9, whichever is applicable, leave this box blank." So I expect your box 8 already has netted out the tax-exempt portion. If your 1099-INT has values in both 8 and 13, I'm unsure what that signifies. You should probably ask the provider. (And if you do subtract it out, do you get the same number that TurboTax gets for line 2a?)
    – Doug Deden
    Feb 24 at 16:28
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    I have tried many ways to match Turbo Tax including what you suggest. However, I still do not match Turbo Tax exactly. I am close.
    – Bob
    Feb 25 at 16:00

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