IRA Distribution

[Ralph S1]

My wife and I have a total of 4 IRAs. One is an Inherited IRA in which I need to take an RDM each year. For my personal IRA I have been converting into a Roth IRA for the past 4 years staying below the dollar amount previously taxed. I have only had to pay NJ tax on the inherited IRA. For 2023, I start to pull money from my SEP IRA to convert into my Roth IRA for the first time. Turbo tax is asking me in the NJ portion of the tax return. The screen says: Tell us if this is the first withdrawal from this IRA. I checked the Yes button. It then wants to know Total of IRA (Contributions Previously Taxed)  as a hyperlink.

First couple questions is: is Turbo Tax asking for just the total of the SEP IRA and/or the contributions previously taxed

Then on the same screen it is asking for : Value of all IRA's on 12/31/23

I have provided the information, as I understand it. Turbo Tax is calculating I owe NJ tax on my withdrawal. This should not happen; as this is the first time for the SEP IRA. The amount I withdrew is fractional to the amount previous tax amount during my contributions to the SEP IRA

Please explain or guide me to instructions and explanations.

[jtax]

Are you saying this (using made up example numbers):

Traditional IRA after-tax contributions in prior years say $10k. No tax deductible contributions. Appreciation $5k, total $15k.

You convert say $6k to a Roth. 

It sounds like you are reporting no taxable income because $10k has already been taxed and that is more than the $6k conversion. 

That is not the way it works. Each dollar withdrawn from the traditional IRA (whether for conversion or spending) is part after tax and part taxable. In the above example the non taxable amount would be $6k times ($10k / $15k) = $4k. $2k would be taxable.

I do not know about NJ taxation so I can't help with that.

For the value of all IRAs TT is asking for the value of all of your own (not inherited) non-Roth IRAs. Why? Because it needs to determine the denominator of the calculation described above.

[fanfare]

TurboTax is filling in Worksheet C which is described in the Instructions Booklet  for NJ-1040.

IRAs consist of Traditional, SEP and SIMPLE IRAs.

NJ says you can do a Worksheet for each IRA or combine all your IRAs as is done on Form 8606.

I don't think the tax software will support multiple Worksheets per person, so you have to do it the combined way.

@Ralph S1 

[fanfare]

If you want to to skip recovery,

enter some small number for contributions and enter a humongous value for your IRAs like $40,000,000.

your recovered contribution will be zero.
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@Ralph S1