1099R for NYSLRS Pension Payments in 2023, Filing Resident in NJ

[Cparias]

I worked in NY for about 10 years for a NY State agency (non resident in NY), living and filing as resident in NJ.

I contributed to NYSLRS Pension System, Tier 6, for about little more than 10 years, which I understand is a Defined Benefits/Contribution Plan - 401(a). There were no employer contributions.

Retired mid 2023, and started receiving Pension payments for the rest of 2023.

My contributions were tax deferred for Federal but taxable in NY, and also taxable in NJ.

I received my first 1099R from NYSLRS for 2023, but when I enter it in TurboTax it asks me for "method of distribution - 3 year rule or General".  I think this is for NJ, because I know the amount received is all taxable for Federal, but a portion (or all) may be taxable in NJ.

Entered the "General Rule". Then Turbo Tax asks me for my Total Contributions and the Expected return.

I can get my total contributions from all my W2s, but I called NYSLRS to get the expected return amount, and they were surprised of the question. They do not know what that is, and they never provided such information to pension recipients,  as the plan, as they said, is a Defined Benefits 401(a) plan.

How do people who live and file "Resident" taxes in NJ, but receive pension from NY (NYSLRS) enter the 1099R information in turbo tax. This must be a common issue.

I am using TurboTax Desktop Premier for 2023 (Windows 11).

Thanks

[DianeW777 · Accepted solution]

You would not use the 'General Rule' for this pension unless you have after-tax dollars that you paid into the plan.  You have no cost in the plan for federal purposes if it was all pre-tax dollars that went into the plan.  If you have no cost in the plan (after tax dollars) there is no need for using this rule.  However, if you did contribute after-tax dollars then you would use the simplified or general rule.  You must find your cost in the plan.

According to New Jersey (NJ) you must pay tax on your resident return just like the federal return.

New York (NY): NYSLRS pensions are not subject to New York State or local income tax, but if you move to another state, that state may tax your pension.

New Jersey (NJ): Noncontributory Plans and Contributory Plans

Noncontributory Plans:
If you were not required to contribute to your retirement plan while you were working, it is a noncontributory plan. All the amounts you receive from that plan are fully taxable.

If you did contribute after-tax dollars the same amount should be taxable on NJ as the federal.

Contributory Plans (Other Than IRAs):
If you were required to contribute to your retirement plan, it is a contributory plan. Contributions are usually made through payroll deductions, and, in general, have already been taxed. Your contributions are not taxed when withdrawn. However, any employer contributions and earnings that have not been taxed must be reported.

You will need to determine the taxable and excludable parts of your distribution. There are two methods you can use to calculate these amounts: Three-Year Rule Method and General Rule Method. If you use the Three-year Rule Method, your pension is not reported as taxable income until the payments you receive from the plan equal the amount you contributed. Once you have received an amount equal to your contributions, all payments from the pension plan are fully taxable. If you use the General Rule Method, part of your pension or annuity payment is taxable and part is excluded from your income every year. If you are filing a resident return, you must report both the taxable and excludable portions of your distribution on the separate lines provided for that purpose on Form NJ-1040.

[BarbaraNJ]

My question is a little different.

I retired from State of NJ July 2023. I received a pension payment every month from July till Dec 2023

I also received a W2 from my employer as I was working for 2023.

All of my NJ pension deductions from my paycheck were pretax for Federal but after tax for NJ

My annual pension is $18,000. My lifetime contributions to my plan were $57,291.77

I did not make any adjustments to my 2023 income tax return for NJ. I entered exactly what was on my 1099-R form.

It looks like it will take more than 3 years to recover my member contributions.

Was I supposed to make an adjustment to my 2023 NJ income tax return for this ?

Do I need to make an adjustment to my 2024 NJ income tax return ?

I am using Turbo Tax Premier ( also used it last year).

Thank you.

[BarbaraNJ]

I forgot to mention that I was 60 at the end of 2023 and age 61 this year.

[RobertB4444]

No.  As long as you entered all of the numbers exactly as they appear on your 1099-R you don't need to make any other adjustments.

@BarbaraNJ