Hi Wendy! Welcome to SavingAdvice! Quite a few DISers have found their way over here (usually by my urging).
To answer your question kind of, a certain portion of your earnings may be exempt from state and/or federal taxes.
Let's say you earned $1,000 in interest from your MMA. The form shows that 1% came from federal obligations. Interest earned from federal obligations is not taxable, so $10 of your interest would be exempt from taxation. I'm no tax expert - I use an accountant personally - so I'm not sure how you go about reporting this non-taxable portion of the income.
There are some more tax-savvy folks here who can probably give more helpful info.
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Steve
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