NJ: was this the 1st withdrawal from this IRA?

[Mitzy20]

My husband took a withdrawal from his SEP IRA last year. He also took one this year, which was his first official RMD.

Why is NJ asking  "this was first withdrawal from this IRA"?

Then they want the value of ALL IRAs as of 12/31/20.

Why do they need this information?

If I leave these questions blank, will there be any issues?

Thank you

[rjs]

On your New Jersey tax return part of an IRA withdrawal is not taxable. The nontaxable part is the portion of the withdrawal that represents a return of your contributions to the IRA. TurboTax is asking for the information it needs to calculate how much of the withdrawal is taxable and how much is not taxable. On your Form NJ-1040 the taxable portion will be included in the amount on line 20a and the nontaxable portion will be included on line 20b.

I'm not sure what will happen if you leave it blank. Leaving it blank would make the calculation incorrect, which could result in your paying less tax than you should. The state could bill you for the additional tax later, plus interest and penalties.

[Mitzy20]

Not sure I understand:

On your New Jersey tax return part of an IRA withdrawal is not taxable. The nontaxable part is the portion of the withdrawal that represents a return of your contributions to the IRA. TurboTax is asking for the information it needs to calculate how much of the withdrawal is taxable and how much is not taxable. 

what is a "return of your contribution to the IRA"?

He took out money in 2019, and also this year, and paid taxes on both withdrawals...

I did not use TT in 2019. I had a CPA do the taxes.

For 2020, I recorded his withholding in TT

[rjs]

The money that he put into the IRA in past years is his contributions. The value of the IRA grew because the investments in it earned income. So the value of the IRA now is partly the money that he originally contributed and partly earnings from investments. When he takes money out of the IRA, part of what he takes out is money that he originally put in - his contributions - and part is earnings from the investments. The contributions part of the withdrawal is not taxable (in New Jersey) but the earnings part is taxable.

Withholding has nothing to do with calculating how much of the IRA withdrawal is taxable.

You have asked a lot of questions in the last few days. You seem to be having a lot of trouble with your tax returns. I suggest that you go back to the CPA for help. The people who answer your questions here cannot see your tax returns and tax documents, or your overall tax situation. We only see what you write in your posts. We could be missing things. The CPA can see the whole picture, including changes from last year, and may see things that we are missing.

[Mitzy20]

Thanks, but no, I don't need to go back to the CPA.

I ask questions yes - just like everyone else who is not a CPA or well-versed in doing taxes.  That is the purpose of the community and that's how I use it - to ask questions.

My taxes are complicated by the fact that I have a partnership and K-1 to deal with.

Other than that  - pretty straightforward.

Thanks.

[fanfare · Accepted solution]

get the NJ Income Tax Booklet and look up Worksheet C.

It will explain, or try to explain what TurboTax is trying to do.

There is a first year calculation (the first year you do the worksheet)

and a subsequent years calculation for all following years (you will have to keep worksheets).

BUT

If you are retired with no income from wages  and you get the NJ Pension Exclusion,

then there is no need to go through all this, unless your NJ income is over $100,000 dollars.

[Mitzy20]

hello,

I have the NJ Worksheet C.

My husband has a SEP IRA which he has taken w/d from in 2018 and 2020. I have an inherited IRA and a regular IRA. I have only taken w/d from the inherited IRA - in 2018 & 2019.

Questions:

1) Does the total of ALL IRAs need to be figured on Line 1 of the worksheet? Including the regular IRA which I have never taken a w/d from?

2) I completed 4a) of the worksheet (first year of w/d from IRA / enter the total IRA contributions that were previously taxed). In 4a) I entered the amounts that we paid taxes on to NJ in 2018 and 2019. Is this correct?

Thank You

[fanfare]

You don't combine spouse IRA with your IRA ; they have to be treated separately.

I believe TurboTax will give you two worksheets - T and S.

Also, an inherited IRA has to be treated on its own.

If you want to prorate contributions made by original owner (NJ taxpayer) for an inherited IRA, I don't think TurboTax can do it.

2) yes, since you took money in those years and paid NJ tax on all of it, you recovered that amount from the total contributions. Note: it is possible that that amount can exhaust the recovery, in which case there's nothing left to be prorated in the future.

[REMH05]

NJ worksheet C states that on line 8 of part 1 

Excludable portion of this year's  withdrawal :

enter line 8 amount line 20b on form NJ-1040  --

How do you do this on TurboTax?

My 2021 NJ return got e-filed.

So how do I amend my NJ return for this NJ worksheet C ?

[ErnieS0]

TurboTax calculates the nontaxable portion of an IRA withdrawal for you and puts the amount on line 20b, Form NJ-1040.

Here's how to do it:

1. In New Jersey go to IRA Information for You
2. Select No, I've made withdrawals from this account before
3. Enter the value of your IRAs on 12/31/2021 and contributions made for 2021 between 1/1/2022 and 4/15/2022
4. On IRA Withdrawals for You, fill in the information about your unrecovered contributions and TurboTax will calculate the nontaxable portion of the withdrawal.

If you did not complete this information there is a place later in New Jersey where you can prepare an amended return. See I need to amend my state return.

[mono1]

Hi: Could you please explain what you mean by "In New Jersey go to IRA Information for You". 

Where do I need to go in TurboTax to initiate the dialog that you mention in 2, 3 and 4. 

Any help you can provide will be greatly appreciated.

Thanks

[fanfare]

By " in "New Jersey is meant:

you are working your NJ state income tax return.

use the Step-by-Step interview and you eventually will get there.

[mono1]

Hi Fanfare: I went back and did the following:

> Your State Returns: New Jersey: Edit > Continue

> Adjustments > Update -> Other Wage Adjustments -> Continue -> Roth conversion for you 

Value of account on date of distribution_________

Contribution related to this distribution previously taxed by New Jersey______.

Then there is a LEARN MORE button which basically instructs on how to fill out Worksheet C but it does not do it for me. So the bottom line is will TurboTax compute Worksheet C or do I have to do it myself in a separate XL spreadsheet? I would appreciate a clarification. I am using "Home and Business 2021" product

Thanks

[fanfare]

I haven't used TurboTax Home and Business 2021 or any other TurboTax for 2021, so I can't tell you what it will or will not do for you.

If you try to enter the amount yourself you will be doing an  override and this stops you from e-Filing.

Based on what you said, I don't think you went through the entire NJ interview.

[mono1]

I have a feeling that option of generating Worksheet C is not available in 2021 version of TurboTax. If someone else who is more knowledgeable about TurboTax can comment on this that would help.

Thanks