Backdoor Roth – Resulting in Additional NJ Tax Due

[jkreit70]

In my situation, I entered the 1099-R with the Gross and Taxable amounts, marked "Taxable amount not determined," and checked "Total distribution," per the document I received. The distribution code is "2 – Early distribution, exception applies." I followed the same process for the 2023 tax year without any issues.

When I reach the question "What did you do with the money?", I select "Moved the money to another retirement account." However, if I choose "I did a combination of rolling over, converting, or cashing out the money" and enter the amount converted to a Roth IRA, my NJ tax due increases.

If instead I select "Rolled over to another (or back to the same) retirement account," my NJ tax bill decreases.

I'm confused because this Backdoor Roth conversion should not be subject to NJ tax. What am I missing?

?

[jkreit70]

I think I figured it out based on previous post... 

You will have to enter the amount as “Contributions Related to this distribution previously Taxed by New Jersey” on the “Roth Conversion” screen during the state interview. In the state interview click "Update" next to "Adjustments" and continue through the questions until you get to the "Roth Conversion" screen.

Assuming this was the issue...