NJ Pension Exclusion and Estimated Taxes

[Reggieng]

The following was asked on April 5, 2021 and, other than an acknowledgement that a problem probably has existed for several years, no answer or resolution has been provided to date:

This issue relates to the calculation of estimated taxes for New Jersey and the NJ Pension Exclusion.  For married filing jointly, the pension exclusion only applies for a total household income below $100,000.  The exclusion immediately goes to zero for incomes over $100,000, even by one dollar.  The NJ estimated tax calculation in TurboTax does not seem to handle this correctly.  When a total income of over $100,000 is entered in TurboTax (Line 1 of the Form), the pension exclusion (Line 2) stills shows $100,000 and the gross income (line 3) is incorrectly reduced by $100,000.  This would result in a significant underpayment estimated taxes and probable penalties.  I also tried some other larger income values ($200k, $300k and greater) and the program continues to reduce each total income by the $100,000 exclusion, even though pension exclusion clearly does not apply.  Am I missing something?

When will this problem be resolved?

[JGW28]

It seems that for 2021 TurboTax (for NJ state) Desktop version is computing the NJ Pension exclusion incorrectly. The max income limit was increased from $100,000 to $150,000 for married couples for 2021. However, the amount of the exemption is supposed to be 100% for < $100K, 50% from $100K to $125K, then drop to 25% from $125K to $150K. However, TurboTax doesn't seem to be reducing the exemption at all.

Has anyone else noticed this?

TurboxTax, are you fixing this?

How are we supposed to file our NJ State taxes with this problem?

[SteamTrain]

The NJ 2021 tax forms are not supposed to be available until on or AFTER the 27th of January....so yeah, the 2020 values might be in there now.'

Come back the 28th and step thru the pension Q&A again and all the error checks too, and see what happens then.  None of us will know whether the limits have been properly implemented until then, simply because the NJ forms haven't been finalized.

DO NOT file your  NJ tax return until after the 27th  (but.. would not recommend filing either the Fed or the NJ until the first, or better, 2nd week in Feb)

_________________________________________

New Jersey Individual Forms Availability (intuit.com)

[Reggieng]

It appears that proper treatment of the NJ Pension Exclusion has been a longer-standing issue.  My initial post on this issue was on April 5, 2021 while trying to calculate New Jersey estimated taxes that involved the NJ Pension Exclusion.  At that time, the Exclusion had a ceiling of $100K and not the graduated ceiling of $150k in the current law.  Despite receiving several responses that this problem was being flagged for Moderator action (including one on the same day that indicated the problem may have persisted for several years), no action was taken by TurboTax, or at least is visible.  On May 17, 2021 I again reposted that it appeared that the program was not calculating NJ taxes properly for the NJ Pension Exclusion. No further responses were received from TurboTax and this eroded confidence in its software and its 100% accuracy guarantee.  From the lack of action or response to date, it is doubtful that this error will be corrected in the upcoming software updates.  Perhaps I am mistaken, but recommend that users check carefully before filing.

[SteamTrain]

@Reggieng 

Need a clarification at this point....

It's not clear to me whether you are seeing the problem:

a) solely with an improper calculation in how the pension exclusion is dealt with on the next years NJ estimated tax forms, for the NJ-1040ES.

or

b)  are also seeing an improper handling of the calculation for the pension exclusion in the actual NJ-1040 tax return itself .

(or both?)

[Reggieng]

My post of 1/19/2022 described the incorrect calculation of NJ estimated taxes for 2021 using the 2020 tax year software.  The error in applying the NJ Pension Exclusion persisted in the software from when I first calculated the 2021 NJ estimated taxes in April of 2021 through when I tried to get a final estimate in December of 2021.  I ran a number of estimates during the year – all resulting in wrong and grossly underestimated values.

I have not entered information into the 2021 tax year software yet, but it is pretty clear from JGW28’s post that the error, in the same or similar form, persists in the 2021 tax year software.

[JGW28]

I was on the phone with Intuit for about an 45 mins yesterday. (Though it took about 15 mins to figure out how to actually contact them). When I finally connected to an agent, she was great! Very knowledgable. We walked through the worksheet for 2020 and 2021 that NJ provides on line, and we agreed on the problem. 

Once we had that done, she was able to check her notes and with her team. They said that the state '21 code for the Mac was not yet completed and that an update, which would fix/address the exclusion "bug" would be coming, probably by the end of January '22. I said that they should have put something in the program to make people aware.

She said that should we keep me informed if she heard anything new.

Then I spent about 15 mins complaining about the difficulty to figure our how to get help and/or a live agent from Intuit. For those who do this with their online program, TurboTax Live makes it easier to get to an agent. However,, from talking with her, it seems like the program is a bit dumbed down online, i.e., you have more control with the desktop version.

Anyway, let's see what happens 

[JGW28]

The calculation of the exclusion is incorrect (as of 1/19/2022), for the 2021 TTDesktop

If you look at NJ-1040 P2, line 28a, is calculated wrong per the new NJ rules - and there is no form to actually show you how they calculated the exclusion.

[fanfare]

The calculation was done in prior years on the "Pension Wks-TP".

You should see it in Forms mode in your list of forms.

I  don't have TurboTax 2021.