Retirement tax questions
Yes, there is a specific method for reporting this so that this doesn't get reported as taxable income in NJ. According to NJ state sources you would use the Three-year Rule Method to exclude your pension so it is not reported as taxable income until the payments you receive from the plan equal the amount you contributed. Once you have received an amount equal to your contributions, all payments from the pension plan are fully taxable.
To exclude it, providing if you haven't exhausted your contributions, is that after you record your 1099R, there are a series of follow up questions in the federal interview.. One of these asks where this distribution is from, you will indicate that this is the General Rule or 401K benefits. Do not list an amount where it says NJ Distribution amount. Here is what the screen looks like.
