1099-R Distribution

Forum|Forum|3 years ago
February 11, 2023
1 reply
5 views

I received a 1099-R distribution (over 65 and retired). In the state of New Jersey, they tax your contributions to your 401k in each pay check. Unlike Federal where you pay the taxes at the time you withdraw . The problem

is there is no way to exclude the distribution amount in turbo tax. I should not have to pay state taxes on the amount I withdrew. My investment company told me the money I received was all from my contributions and didn't include any profits.

Any Help would be great.

DMarkM1

Level 15

It depends. If you had 401K contributions prior to 1984, NJ taxed your contributions and does not tax the distribution up to the amount of your contributions. When entering the form 1099R you will arrive at a follow on page titled "Where is your distribution from?" You have four options. Assuming your pension is not Military or Disability, you will need to select either the "Three-year rule" or "General Rule" to calculate how much of your distribution is taxable this year.

If you click on the "Learn More" link at the end of the first statement on the page, a detailed explanation of NJ pension taxation is presented. At the end of that help topic you will find a link (here) to the NJ Tax Bulletin that has a worksheet to help you decide which rule you should pick.

The Three-year rule will not tax any distributions for three years and then tax the rest of your distributions after that time. The General rule will tax a percentage of all your distributions. The worksheet in the tax bulletin will help you determine how soon you distributions will exceed your contributions.

For 401K contributions after 1983, your distributions are fully-taxable in NJ.

[edited 2/11/2023 12:18pm]

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fanfare

Level 15

No you are not correct.

NJ says:

Section 401(k) Plans
If you made contributions:
1. On or after January 1, 1984, your contributions to your 401(k) Plan were not included as income when they were made, unless the contributions exceeded the federal elective deferral limit. As a result, you must report all distributions on your New Jersey Income Tax return because they are fully taxable;

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Even though reported on Line 5, a 401k is not a pension plan.

most companies no longer offer pensions.