US Obligation- Box 3 Int

[Rose S]

I have a f1099-Int with $5100 on Box 1 and 1250 in box 3- US obligation. Is it correct to assume that the 1250 is included in f1099-Int box 1 $5100? Pro connect is adding the 1250 to $5100 on the Sch B. I am not sure if this is correct or if it is overstating the interest income. 

[sjrcpa]

The US Obligation interest is not included in the $5,100.

[Rose S]

Thank you. I am confused if Pro Connect is correct in adding that US Obligation amount to box 1 and increasing the taxable interest. My understanding was that US obligation box 3 was to show that out of box 1 the US obligation portion is non tax able to state. Would you have any insights on how best to record this?

[BobKamman]

Your understanding is wrong.  Take a look at the instructions that came with the Form 1099-INT.

Box 3. Shows interest on U.S. Savings Bonds, Treasury bills, Treasury bonds,
and Treasury notes. This may or may not all be taxable. See Pub. 550. This
interest is exempt from state and local income taxes. This interest is not
included in box 1.

[Rose S]

Thankyou for clarifying that! This is helpful. Relieved to know that Pro Connect is doing the right thing by adding the interest from box 3 over and above the $5100 on the federal return - Sch B. I didn't have the instruction for this  particular f1099Int as the client did not upload it, but I did check the IRS website for the instructions, it was not very clear on how the federal should treat the box 3 amount. State being non taxable, I was aware of that. My concern was only on the federal Sch B, it if was correct to increase the $5,100 by the US obligation amount given on Box 3. Have a great weekend!