I received a 1099-INT form which had both taxable and Tax Exempt Interest reported. Tax Exempt bonds were purchased that year with accrued interest paid. When I entered the accrued interest into TaxCut I that only a portion equivalent to the portion of tax exempt to total interest is deducted from the tax exempt interest reported on the 1099 form. This results in a larger tax exempt interest being deducted from the total interest, giving a taxable interest which is less than it should be. I have reported the situation to TaxCut support and have not been able to get the problem resolved. I also entered similar information into Turbo Tax online and found the same problem. I know that I can get the correct taxable interest by using the Override option by placing the Taxable and Tax Exempt interest on separate lines or by entering the Accrued Interest on the line for another 1099 which is wholly Tax Exempt. Override may prevent me from being able to file electronically and the other two options may invite scrutiny from the IRS. Any advice would be appreciated.
John Beurket
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