I have an update, in case it helps anyone. Basically, NY state decided to do this thing called "decoupling," where they do things differently than the federal government in terms of the COVID cares act. Initially they wanted to tax the entire amount taken out of a retirement fund instead of spreading it out over three years. And then, they changed their minds. So now, thankfully, it is treated the same way the IRS treats it. They did that with other items as well, but I know the most about this because I took money out of an IRA.
The form used to recalculate your income for NY state is called IT-558. If you look at the instructions, which can be found at https://www.tax.ny.gov/pdf/current_forms/it/it558i.pdf, you can see on page 2, there are a bunch of items such as A-001 that now say "intentionally omitted." Those are the things NY state changed its mind on and decided to do things the same way as the IRS. If your tax issue is one of those, you don't actually need to file IT-558. I spoke with the NY state tax department for verification. The form only exists for people who need to calculate a new taxable income.
Now of course, the turbotax people seem too stupid to know any of this. So if you call, you will get told a different piece of misinformation by each agent. And at the end of the call they will each ask you to please rate them well.
The reality is, I think turbotax has not programmed the worksheet so it applies to the right people. People like me shouldn't even be doing the worksheet. You can check your specific situation here:
https://www.tax.ny.gov/pit/cares-act-faq.htm
So I found a workaround to be able to efile.
I went back into the federal tax forms and in the retirement withdrawal area I entered in a third of the distribution instead of the whole dollar amount. Now note that I already efiled the IRS return and it was accepted, so this was simply to make the system work for the state return efile. Do NOT do this if you have not yet filed the IRS return and had it accepted. Otherwise you will mess up your federal return.
So for example, I took $20,000 out of an IRA, and I should be taxed $6667 for three years. After the IRS efile was accepted, I went back in and I entered $6667 as the total distribution. I then did NOT indicate this was due to COVID. Now it feeds into the NY state return without flagging that I need to do form IT-558 and I was able to get all the way to efile (I have not yet gotten notice that it was accepted but I only did this 10 minutes ago).
In case you are wondering, NY state does. not require forms that show each 1099 (which is what you get when you take $$ out of a retirement account), where as the IRS does. So in this case I just needed the math to be correct for NY state.
Don't do any of this without checking to see how NY state treats your situation. If your taxable amount changes based on their rules, you are stuck waiting for turbotax to enter that form.
Oh, also. I will never be using turbotax again. Ever. Idiots. All of them. I assume they will be sending me a large check in the mail since I just did the job of their tax professionals and call agents in getting this figured out.
