TurboTax used used wrong income for NJ taxes and we owe big!

[cpagetleake]

Just heard from the IRS that we over $800 for a mistake on our 2020 taxes. Apparently our gross income was higher in New Jersey because my husband contributed to a 403-b plan and his contributions are not counted toward taxable income federally but in New Jersey they ARE. Sadly TurboTax automatically pulls the federal gross income figure and uses it on the NJ state return. In our case the amount was $18,000 less than our NJ gross income should have been. There was NO question in Easy Step to alert me to this. In fact I read a forum post from someone who had the same issue and he reported that TurboTax wouldn't allow him to CORRECT the figure! We now owe tax and penalties for 2020. We're going to get hit with two more big tax bills once New Jersey goes over our 2021 and 2022 tax returns. My mistake was to trust TurboTax and I don't see how I can ever use the product again! Is there any way to report correct annual income in NJ for people who contribute to a retirement account that's not a 401-k?

[DMarkM1]

Neither TurboTax nor NJ use the federal adjusted gross income to report state wage income.  Both use box 16 from forms W2.   For NJ the box 1 amount typically will be lower than the box 16 amount due to items such as 403b contributions that are taxable in NJ but not federally.  

Entering the W2 information correctly will ensure the NJ wage amount will be correct and include the taxable retirement plan contributions.  Compare your W2 box 16 amounts to the amounts reported on line 15 of form NJ-1040.  

Additionally in your prints/downloads of your tax forms you will find a "Wage and Tax Statement" which will show the entries made for forms W2.      

[cpagetleake]

Thanks for your reply. There was a higher amount in box 16 but TurboTax nevertheless used the federal gross amount for both federal and NJ taxes. Not sure why. I answered every question presented in Easy Step with great care and there was no question, as far as I know, that asked if his NJ wages were different than federal. One Hundred percent of husband's income was earned New York, so we didn't even think he would owe NJ taxes on it! Whatever. Had the error occurred and had I experienced what another person reported--he got an error from TurboTax saying he wasn't "permitted" to override the amount!!--I'd have flipped out, knowing how long I'd be on the phone trying to get it straightened out. I'm almost glad the IRS just told us how much we owe, than to through that.

[fanfare]

You will amend your NY resident return to get a credit for additional tax paid to NJ/

@cpagetleake 

Generally, you must file an amended return within 3 years after the date you filed your original return or 2 years after the date you paid the tax, whichever is later.

[fanfare]

Somehow I figured you were filing in NY.

If not a resident ot NY, Never mind.

@cpagetleake