I've emailed support, but thought I'd come here to see if anyone has any feedback.
I reported tax-exempt interest from ordinary dividends on 1040 line 2a. But since the fund holds less than 50% of its assets in CA municipal bonds, none of the interest can be excluded from CA income.
With FreeTaxUSA, this interest is populating on CA 540, Line 2a, which is correct. But it should also be populating on CA 540, Line 2b, Column C as an addition to income. Instead, the software is reporting it as additional income in Column C on Line 3b (ordinary dividends).
Since the placement doesn't change any of the math, or the final outcome, the Summary Sheet I was able to view before making payment for the state return was correct. (It reflected the correct amount for "California Additions to Income".) It was not until after I paid for the state return that I was able to access the actual 540 and CA 540 to discover this issue.
Any suggestions for how to get around it? Or should I just ignore it since the numbers all add up?
FreeTaxUSA populating CA Addition to Income on wrong line on CA 540
byu/DismalSuspect5524 intax
Posted by DismalSuspect5524
1 Comment
It does actually go on the dividend line. Payments from funds you own are dividends. And the amount of taxable ordinary dividends is higher in CA than in the federal return. On the federal return when tax free they get reported on the tax free interest line.