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COVID-19 Cares Act IRS Distribution spread over three years on state return

Forum|Forum|5 years ago
March 4, 2021
35 replies
67 views

I am getting an IRA distribution related to COIVD to work on the federal return but I cannot get it to carryover to New Jersey. The New Jersey return is picking up the entire amount of the distribution. It is my understanding that NJ is conforming to IRS rules regarding this. Any ideas how to spread the IRA distribution on a New Jersey return?

Thank you for your help.

ProSeries Professional

This topic has been closed for replies.

Best answer by qbteachmt

Each State has its own reference materials. Example:

@Rpiano

https://www.nj.gov/treasury/taxation/covid19.shtml

"Pensions, IRA, and 401K Distributions

The CARES Act amended IRC section 72

which includes the early withdrawal penalty and when to report distributions.

New Jersey does not follow IRC section 72 and did not adopt the CARES Act amendment. New Jersey has its own methods for reporting distributions. Taxpayers must follow New Jersey's rules when reporting pension income. See GIT-1&2 Retirement Income

for additional information on how to properly report this income."

You should confirm they are not currently making a change to conformity, of course.

N

ngosyhan

Level 2

I have the same problem. We finally got an update on federal for IRA distribution for COVID. The Michigan form now errors out. I am waiting for the update to Michigan form.

ProSeries: When do you have an update on the State forms related to IRA distribution for COVID?

Thanks,

Yung

P

psanger438

Level 4

I'm still receiving error messages on MI returns as well! UGH, this is so frustrating, just when they get the Federal fixed, they mess up the States!!! About to lose client's over this issue!!!

D

DiDi

Level 3

Same here Michigan and Wisconsin. Clients are not happy. When I call all I get is they are working on it

qbteachmtAnswer

Level 15

Each State has its own reference materials. Example:

@Rpiano

https://www.nj.gov/treasury/taxation/covid19.shtml

"Pensions, IRA, and 401K Distributions

The CARES Act amended IRC section 72

which includes the early withdrawal penalty and when to report distributions.

New Jersey does not follow IRC section 72 and did not adopt the CARES Act amendment. New Jersey has its own methods for reporting distributions. Taxpayers must follow New Jersey's rules when reporting pension income. See GIT-1&2 Retirement Income

for additional information on how to properly report this income."

You should confirm they are not currently making a change to conformity, of course.

Don't yell at us; we're volunteers

R

RpianoAuthor

Level 2

Yes you are 100% correct that was my mistake as it was for a New York client not New Jersey.

It seems like it is working now for NY.

Thank you for your response.

Rich P.

L

LouScafidi

Level 3

NJ Explicitly does not follow the cares act with regards to IRA distributions. My issue is that the program is only carrying one third to my NJ 1040.

https://www.state.nj.us/treasury/taxation/covid19.shtml

L

LouScafidi

Level 3

From the NJ Dept of taxation. It seems that NJ does conform with the Cares act to take Corona Virus related Qualified distributions. See the email below received from the NJ Department of Taxation:

There are two separate provisions in the Cares Act. The Qualified Coronavirus-Related Distributions (QCDs) and
the Pension Loan Provisions and Repayment Requirements.
A pension loan from a retirement plan is a loan that is not reportable as income. The CARES Act did not change
that.
NJ will recognize a QCD as eligible for IRA tax-free rollover treatment for NJ purposes. Taxpayers can report the
income over three years and file amended return when the repayment qualifies.
Taxpayers can report the QCD over three years. NJ has not allowed anything like this in the past, but this is part of
the rollover and we follow rollovers. NJ does not assess any early withdrawal penalties under IRC section 72.
Prior to the CARES Act, NJ followed the rollover treatment of an RMD. However, NJ does not require a RMD.
NJ will follow the CARES Act extension of the rollover period to 90 days and treat it as a qualified rollover.
Thank you for contacting the New Jersey Division of Taxation.
(ams)

G

gsj

Level 2

Hi Lou,

Thank you for posting the response from NJ Dept of Taxation. If possible, would you please also post your original query to NJ? It would help place things more in perspective.

L

LouScafidi

Level 3

From the NJ Dept. of taxation. It seems that NJ does conform with the Cares act to take Corona Virus related Qualified distributions. See the email below received from the NJ Department of Taxation:

There are two separate provisions in the Cares Act. The Qualified Coronavirus-Related Distributions (QCDs) and
the Pension Loan Provisions and Repayment Requirements.
A pension loan from a retirement plan is a loan that is not reportable as income. The CARES Act did not change
that.
NJ will recognize a QCD as eligible for IRA tax-free rollover treatment for NJ purposes. Taxpayers can report the
income over three years and file amended return when the repayment qualifies.
Taxpayers can report the QCD over three years. NJ has not allowed anything like this in the past, but this is part of
the rollover and we follow rollovers. NJ does not assess any early withdrawal penalties under IRC section 72.
Prior to the CARES Act, NJ followed the rollover treatment of an RMD. However, NJ does not require a RMD.
NJ will follow the CARES Act extension of the rollover period to 90 days and treat it as a qualified rollover.
Thank you for contacting the New Jersey Division of Taxation.
(ams)

S

sc2

Level 2

I am trying to figure out how to report a $100k IRA COVID distribution on the 2020 NJ 1040. Turbo Tax places the full amount on Line 20a, but does not allow me to pay only 1/3 of the tax liability in this year’s tax return, as permitted by the CARES Act. Can I put $66,667 on line 20b and line 28b so I can subtract that amount from my taxable income?

K

kc6078

Level 3

Unfortunately it's correct. NJ is taxing you on the full amount. They are not following CARES Act. You can't break into thirds like on Federal return.

Z

zerdna

Level 2

same problem here. Covid related distribution can be spread on federal, but not on NJ tax return. The so-called "solution" on this site is not a solution. It is an incorrect statement, claiming NJ does not allow three year spread. NJ does allow that see https://www.nj.gov/treasury/taxation/covidpension.shtml. It says "You can report income over three years or in one year (the year of distribution)". Its just TurboTax Deluxe doesn't want to do that. If there is some roundabout way, I'd very much would like to know it. Otherwise this is software fault that would cause many NJ residents to overpay thousands of dollars to the state.

qbteachmt

Level 15

@zerdna

This topic is from back in March, so anything that old no longer applies, when a State has passed retroactive changes to their tax code.

This topic is in a ProSeries Program Users Community. If you are not using that program, no one here can help you.

This is not a TurboTax community.

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte Tax Preparation programs, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

Don't yell at us; we're volunteers

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