Problem with turbo tax calculating taxable income for new jersey state

[RT315]

I am using Turbo Tax Do It Yourself Premium for 2025.  I made a Roth IRA withdrawal in 2025 and Turbo Tax is including that amount in my taxable income on the New Jersey state return.  I meet all the requirements for the withdrawal to be qualified; over 59 1/2 and had Roth IRA account for more than 5 years.  Therefore it is not taxable income in New Jersey.  I had this same situation on my 2024 taxes and Turbo Tax calculated the state taxable income correctly that year.  This year it is not being handled correctly.  Can the software be corrected?  Can I remove that amount from my state taxable income somehow before any software correction is made?  Thanks.

[RogerD1]

On the 1099-R for your Roth IRA withdrawal, what code are you seeing in Box 7?  If it is a code Q, the withdrawal from the IRA would  not be appearing on your NJ return.  If it is a code T or J, it will be taxable in NJ.  If those two codes are what are appearing and you feel that you would qualify as having it be considered qualifying distribution as a code Q for meeting the 5 year rule and being over 59.5 years old, you should consult with the custodian of the IRA that issued that 1099-R and have them reissue it with a code Q in box 7.

[RT315]

I understand that the T in box 7 is probably what is causing the Roth IRA withdrawal to be added to taxable income on the New Jersey return.  The reason I still believe there is a problem with the software is this.  I had the exact same situation last year, 2024.  I took a Roth IRA withdrawal in 2024 and there was a T in box 7.  Turbo Tax asks how long we have had a Roth IRA open.  I answered more than 5 years.  That is why I believe that Turbo Tax correctly did not add the Roth IRA withdrawal to my New Jersey taxable income in 2024.  However, it is adding it this year.  Same situation, same answers to the Turbo Tax questions.  So, if this cannot be fixed in Turbo Tax, that raises a couple questions.  Can I submit the Federal return without submitting the state return?  Or, can I enter a value in the state return taxable income field to override the value that Turbo Tax has entered?  Thanks.

[Vanessa A]

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number  (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)

[Vanessa A]

As of last night, this issue has been updated.  You will now see in the NJ section a statement that says NJ does not tax Code Q distributions.  Although you entered it as a T, this is because the fund isn't committing to code Q which makes it nontaxable.  Once you answer some of the questions in the federal section after entering your 1099-R, TurboTax is then saying yes you qualify and making the income nontaxable in NJ as well.