I am NJ resident, My w2 has third party sick box checked in block 13 and no entry in block 16. What should be my NJ taxable income? Block 1 shows some wages

[DanielV01 · Accepted solution]

Third-party sick pay is not taxable in NJ.  It is taxable on the Federal return, which is why you see information in Box 1, and why you don't see information in box 16.  But make sure on the W2 screen in TurboTax to check the Third-Party Sick Pay box so that it is excluded from your NJ income.

Here's a website with additional information:  Nontaxable Income in NJ

[kris110154]

Thanks for your response. I agree with you answer. However there seems some glitch in my Turbo Tax calculation. I made my W-2 input exactly as you advised above but Turbo Tax is including Block 1 wages in my NJ wages . There is no entry in block 16 and third party sick pay box is checked,

[DanielV01]

I did a sample on TT online and the income was filtered out automatically.  Try putting a zero in box 16 to see if this removes the income.  If it does not, there is another possibility also.  NJ includes a few items as being taxable that the Federal return does not.  If you contributed to a retirement fund other than a 401K or had contributions to an HSA, it's not included in Federal but is on NJ state return.  I can't see your return, but these are common issues that others have had also.

[kris110154]

Putting a zero in 16 works. Thanks . I will recommend that Turbo Tax include this as a TIP in their help ctr

[jdalden]

Problem still occurs in TurboTax Premier 2019.  Thank you for your help! Putting in a "0" did the trick and it also enabled the software to record the Payor's state ID code where it didn't save it before.  Kinda ticked off at TurboTax programmers on this one. Your answer saved us ALOT of money! 

[TAXus1]

There is an amount in box 16 that is lower than box 1, 2, 3.   Guess that amount would not be the “third party sick pay” subject to NJ taxes?

[MayaD]

The difference between Box 1 and Box 16 is the third party sick leave that is taxable on the federal return but excluded from NJ income. Make sure to check box 13 when you enter your W-2.

Unemployment compensation and temporary disability (including family leave insurance benefits) received from the State of New Jersey or as third-party sick pay are not taxable. Do not include these amounts on your New Jersey return. NJ.gov

[TAXus1]

Yes, we are saying the same thing with different words.

Bottom line is that the amount shown in box 16 is subject to NJ tax because it is the difference between the Federal amount shown in box 1; 3; 5.  Will have to confirm with the client that the time on sick pay was a limited amount of time and that why there is a difference in addition to any other deductions.

Other related question is why check box 13c in the W-2 in the program because whether it is checked or not. does not do anything in the program?

thanks

[DianeW777]

Your employer completed the W-2 correctly, so you are correct in stating that the tax returns will not change. However, it will explain the difference in state income.

@TAXus1

• why check box 13c in the W-2 in the program because whether it is checked or not. does not do anything in the program? The indicator will be an alert to the state about the income difference between state and federal without an intervention.  New Jersey (NJ) will already know why the income is different.