Hi, New Jersey State Return, IRA information, Value of all IRA's on 12/31/2109. Do I include my Traditional IRA and my Inherited Non Spousal IRA?

[KathrynG3]

For more instruction, see NJ 1040 Instructions for Worksheet C, page 16. Value of all IRA's on 12/31/2019 

[bolinda]

Thank you for quick response.  I feel like I am opening a Pandora's box.  When I get to the "contributions previously taxed",  I am stumped.  I did go to the resource you mentioned and am trying to use the worksheet.  I have regular IRAs that I have since converted to Roths (did the 4 yr. tax payment plan when it was offered for the first time).  I had a 414h/403B that I rolled into an IRA (converting it to a Roth is too expensive).  I had to withdraw $1000 from this to signify that I was retiring (in 9/15).   I paid tax on that but it was not an IRA as for yet.   Help!

[KathrynG3]

You're welcome! Well, your best bet is to trace the contributions and any distributions to determine what portion is taxable. 

Form 5498 with state detail would be ideal for tracking what to enter as the value of the IRA. In the absence of good data from Form 5498 at the state level, I recommend preparing a spreadsheet to track each IRA so this is more manageable going forward.

I've hyperlinked the resource you need for more guidance on how to calculate the taxable portion of your retirement accounts. Since these accounts were not from a 401(k), the contributions would have already been taxed.

From the NJ-1040 Instructions page 17, which you may have already seen, but I'm posting for fellow New Jersey residents looking for retirement withdrawal guidance:

IRAs Your IRA consists of contributions, earnings, and certain amounts rolled over from pension plans. In general, your contributions were taxed when they were made and are not taxable when you make a withdrawal. All the earnings and any amounts rolled over tax-free are taxable when withdrawn.

Use Worksheet C to calculate the taxable and excludable portions of your IRA withdrawal. If you made withdrawals from multiple IRAs, you can use a separate worksheet for each or combine all IRAs on one worksheet.

Lump-Sum Withdrawal. If you withdraw the total amount from an IRA, all the earnings and any amounts rolled over taxfree are taxable. You must report these amounts in the year you make the withdrawal.

Periodic Withdrawals. If you make withdrawals over a period of years, the part of the annual distribution that represents earnings is taxable. The amount taxable for New Jersey purposes may be different from the amount you report on your federal return.

For more information on IRA withdrawals, see GIT-1 and GIT-2, Retirement Income.

New Jersey Tax Guide Retirement Income

Roth IRAs

Your contributions to a Roth IRA were taxed by New Jersey when they were made. Distributions from a Roth IRA that meet the requirements of a qualified distribution are excludable. Do not include qualified distributions on Form NJ-1040. If you received a nonqualified distribution, you must report the earnings on line 20a, and report the excludable portion on line 20b. A distribution that is considered nonqualified for federal purposes is also considered nonqualified for New Jersey purposes.

If you converted an existing IRA to a rollover Roth IRA during Tax Year 2019, any amount from the existing IRA that would be taxable if withdrawn must be included on line 20a.

For more information on Roth IRAs, see Technical Bulletin TB-44.

@bolinda

[fanfare]

Your NJ Turbotax program tracks only your own IRA.

to do the worksheet you must know the total amount you contributed into your own IRA over the years.

an inherited return must be treated separately, but guess what the NJ program can't handle unrecovered contribution in an inherited IRA.

Nor can the main program handle an inherited IRA with a basis.

[fanfare]

"contributions previously taxed" means any distribution you took and reported before the worksheet was invented, it's usually zero, but may not be.

This amount is only used the first year you start allocating unrecovered contributions

[fanfare]

"In general, your contributions were taxed when they were made and are not taxable when you make a withdrawal."

In general this is overly simplistic.

 when you make a withdrawal a portion of your  contribution will be "recovered" and not taxed. That's what the Worksheet C calculates. it is similar but not identical to the federal return's 'prior years basis'.

[OG777]

Hi - when i put 0, turbotax sees this an error. and these form came up because i removed excess of contribution. can you help how to correct it?

[fanfare]

If you removed excess contributions, and had earnings, the earnings are a distribution,

so you get to do the unrecovered contributions calculation.

If you enter zero unrecovered contributions it should skip that step.

[OG777]

thanks! but what would be amount in line 4a, blank?  it is also asking to enter value of ira as of 12/31, skip this part? as it calculates as earnings which is crazy

[fanfare]

you need both pieces of information for the worksheet to do its job.

if you don't want the calculations,

enter any amount ($100) on 4a and then enter a humungous value for your IRA, like $39,000,000.

This will result in zero recovered contributions in 2021.

[OG777]

so when i am entering in line 20  distributions 2021 from roth  do i enter growth amount of my excess contribution?  line 22 keeps returning an error even if it is empty. i guess i need help to figure out how to enter ingo proper for line 19 contribution smart worksheet?

[fanfare]

Taking money from a Roth is different from taking money from a Traditional IRA.

your basis (contributions) in Roth is used up first, and it is not prorated.

I've said all I can about the prorating of your Traditional IRA.