If you have an adjustment that should be made for the Federal return:
On Schedule B, line 1b, link (F9) to the New Interest Statement: Schedule B Line 1b Interest Income. There is a column named NAEOB. Mark N for Nominee, A for Accrued, E for Tax Exempt, O for OID Adjustment, and B for Amortized Bond Premium.
The next column, NAEOB amount, should be used to enter the nominee, accrued, exempt, OID adjustment, or amortized bond amount.
See F-1 help for Schedule B and the statement for more information. If you are unfamiliar with these adjustments, consult a tax reference such as IRS Publication 17.
If you need to adjust interest for states:
To make adjustments for state tax purposes, go to the State adjust column on the Interest Worksheet. This column should be used if the state taxes interest differently than the Federal government. For instance, use this column if the interest is tax-exempt for Federal purposes but taxable for your state.
Enter a + or - symbol in the appropriate column to show whether the interest should be added or subtracted from the state return. Then, enter the amount that is taxed differently from the Federal.
Some states may use this column differently. Check the F1 help on state forms for more information on how each state uses the column.
The interest income is tax-exempt for Federal purposes but taxable for the state. Go to the NAEOB column, enter E, then enter the tax-exempt amount. Then, go to the State Adjust column and enter a + and the amount of the taxable interest to your state. The income will be shown as tax-exempt on the Federal return and taxable on the state return.