Joseph,
I appreciate your response; however, you've neglected to consider that my question involved withdrawals from a Thrift Savings Plan. Contributions to Federal Thrift Savings Plans are in fact taxed by New Jersey. I visited a NJ regional information center and contacted the NJ Division of Taxation for an answer to my question. Both responded in kind:
"New Jersey, unlike the federal, taxed contributions made to a Federal Thrift Savings Plan for gross income tax purposes. These contributions are not taxable at distribution. Only interest, dividends and other earnings, in excess of previously taxed amounts, credited to the Federal Thrift Savings Plan are subject to New Jersey gross income tax when withdrawn.
You may receive a Form 1099R from your employer stating your New Jersey taxable distribution. Also, the New Jersey IRA worksheet (Worksheet C) is designed to help the taxpayer calculate the taxable portion of a withdrawal of retirement account income for New Jersey gross income tax purposes. You can also contact your former employer or payroll company for additional information regarding contributions to the Federal Thrift Savings Plan."
I believe this is a key mistake in the TurboTax program where an entry for a TSP withdrawal in the Federal return is automatically written to the State return without default guidance to Worksheet C. The only workaround is to open the form for a Pension and IRA Worksheet (should be called Worksheet C) and enter values manually. Not a desirable option.
Anyway, problem solved.
