NJ State Tax Return - NY Employer/Live in NJ - Duplicate Wage Removal

[drummaster2001]

I am a salaried (W-2) employee working in NYC and reside in NJ.  I also completed both the Federal and NY State returns before starting the NJ State return

In working on the NJ State return, I am prompted to confirm the taxable state wages and to remove duplicates since both the NY + NJ totals are listed on the W-2.  Which is the correct one to remove:

- NJ (higher figure); or

- NY (state where income is earned)

[ErnieS0 · Accepted solution]

Remove the New York wages from the New Jersey section of TurboTax. New Jersey will tax the NJ amount reported on W-2 Box 16.

NJ gives a credit for tax paid to NY, but the credit is based on NY wages. TurboTax will bring in the numbers in the other state tax credit section if you did NY first.

New Jersey wages are higher than New York wages because NJ taxes some benefits that are pre-tax deductions for federal and New York.

• New Jersey does not allow you to exclude from wages amounts you contribute to deferred compensation and retirement plans, other than 401(k) Plans.
• New Jersey does not allow you to deduct moving expenses or employee business expenses from wages, although you can exclude reimbursements for certain expenses if they are included in wages on your W-2.
• If you are considered a “statutory employee” for federal tax purposes, you cannot deduct your business expenses unless you are self-employed or an independent contractor under New Jersey law. The federal label of “statutory employee” has no meaning for New Jersey tax purposes.

NJ Income Tax – Wages

[hyoonx]

I have a couple of questions about this NJ state rule.  Say I contributed $7,000 to Traditional IRA and deferred $20,000 salary to a supplemental retirement account, which my employer provided as a tax deferred plan (unqualified-deferred compensation).    In addition, these amount (total $27,000) are not reported on NJ W-2 form.   

Here are my questions.  

1) Shall I need to add "$27,000" to my NJ wages manually even though NJ W-2 does not show this?

2) or do I just need to remove "NY state wages-duplicate" like the above answer?

I am confuse how to handle this rule.  

• New Jersey does not allow you to exclude from wages amounts you contribute to deferred compensation and retirement plans, other than 401(k) Plans.

If I have to add a deferred compensation manually for NJ wages, where can I enter this on Turbo Tax?  

[ErnieS0]

Generally, your employer will add deferred compensation to New Jersey wages if your W-2 has a NJ wage line in Boxes 15-20. 

What commonly happens is that you only have state wages and withholding for your work state so there is no NJ wage line, and since the rules are different in other states, you need an add back.

Add your salary deferral (other than 401(k) which NJ allows) to the screen "Other Wage Adjustments – W-2."

Your $7,000 IRA contribution is outside of your W-2. You don’t need an adjustment. TurboTax will not transfer this deduction from federal to state. 

Do keep track of your nondeductible contributions. Part of your IRA withdrawals will be tax-free for NJ when you start taking money out.

TurboTax does not track this. 

Most people end up overpaying NJ because they have no records of contributions so they report their whole contribution as taxable to the state.

@hyoonx 

[hyoonx]

@ErnieS0

Thank you so much for your response to my question above.  It helps me a lot.  

@ErnieS0