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New Jersey WebFile Help Page 3

Wages/Salaries Worksheet

W-2 forms are received for services performed, both inside and outside New Jersey, as an employee during the taxable year. Please indicate on the worksheet whether the W-2 form is for you or your spouse/civil union partner, then fill in the required information. The maximum number of W-2's allowed is 25. Enter the total State wages, salaries, tips, etc. from all employment both inside and outside New Jersey. The "State wages" figure on W-2(s) you received from employment outside New Jersey may need to be adjusted to reflect New Jersey tax law.

If you have income that is taxed both by New Jersey and by another jurisdiction outside of New Jersey, you may be eligible for a credit against your New Jersey income tax. See the HELP page for Schedule A, Credit for Income or Wage Taxes Paid to Other Jurisdiction.

Enter only the whole dollar amount. Do not include dollar signs, commas or decimal points.

Be sure to use the corresponding figure(s) from each box on your W-2(s) and enter the following information from each W-2:

State Employer Identification Number - generally found in box 15 of your W-2.
The amount of Federal Wages
The amount of State Wages - generally found in box 16 of your W-2.
The amount of Federal Tax Withholdings
The amount of New Jersey State Tax Withholdings - generally found in box 17 of your W-2.
The amount of New Jersey UI/HC/WD Contributions
The amount of New Jersey Disability Contributions
The amount of New Jersey Family Leave Insurance Contributions

If you are employed outside New Jersey enter zero "0" in each field for NJ UI/HC/WD and NJ Disability Contributions. Also, if your employer did not withhold New Jersey State income tax enter zero "0" in the field for NJ State Withholding.

NOTE: You do not need to submit your W-2 forms to the Division if you file using NJ WebFile unless you are asked.

Do not report pension and annuity income or early retirement benefits on this screen, however, you must include severance payments as wages.

Retirement Plans
Under New Jersey law, contributions to retirement plans (other than 401(k) Plans) are included in the State wages figure on the W-2 in the year the wages are earned. This may cause your State wages figure to be higher than your Federal wages figure.

You may not use NJ WebFile if you wish to reduce the amount of New Jersey wages reported on Form W-2 for any of the following:
  • Meals and Lodging
  • Qualified Reimbursed Employee Business Expenses
  • Certain amounts received for personal injuries or sickness
  • Qualified Moving Expenses
For more information regarding these items refer to Form NJ-1040 instruction booklet.

Commuter Transportation Benefits
Certain amounts you receive from your employer for using an alternative means of commuting (such as public transportation, carpools, vanpools, etc.), may be excluded from your New Jersey gross income. Commuter transportation benefits may not be excluded from gross income unless your employer provides those benefits in addition to your regular compensation.

If the commuter transportation benefits you received exceed the maximum excludable amount, the excess amount is taxable and is included in your gross income. Your W-2 form will show both the taxable and nontaxable benefit amounts. The taxable benefits are included in the "State wages" figure on your W-2, while the nontaxable benefits are not.

An employee who receives money towards commuter transportation benefits must provide his/her employer with suitable proof (receipts, ticket stubs, etc.) to show that the employer-provided money was used for an alternative means of commuting.

Federal Statutory Employees
If you are considered a "statutory employee" for Federal income tax purposes, you may not deduct your business expenses unless you are self-employed or an independent contractor under New Jersey law. The Federal label of "statutory employee" has no meaning for New Jersey Gross Income Tax purposes. Business expenses may only be deducted from the business income of a self-employed individual.

Important Notes:
  • You are required to indicate whether each W-2 is for yourself or your spouse/civil union partner.
  • The State Wage Amount is usually found in Box 16 of your W-2.
  • The State Withholdings Amount is usually found in Box 17 of your W-2.
  • When you have completed entering your wage information, click "Continue" on the bottom of the screen to return to the NJ-1040 screen.
  • Click on the "Add More" button if you have more W-2's than the provided spaces.
  • If you wish to clear all the information on the Wages Worksheet, click the "Cancel" button and you will return to the NJ -1040 Screen.
  • Clicking the "Calculate" button will allow you to preview your totals before proceeding.

Taxable Interest Income - Taxable Interest Worksheet

Report all of your taxable interest income from sources both inside and outside of New Jersey. Enter the name of each payor from which you received a Form 1099-INT, then enter the corresponding amount of interest income that you received. You can not use NJ WebFile if you received more than twelve (12) 1099-INT statements. Do not include interest earned on U.S. Savings Bonds.

New Jersey taxable interest income includes interest from the following:
  • Banks
  • Savings and loan associations
  • Credit unions
  • Savings account
  • Earnings on nonqualified distributions from qualified state tuition program accounts, including the New Jersey Better Educational Savings Trust Program (NJBEST) accounts
  • Earnings on nonqualified distributions from qualified state 529A Achieving a Better Life Experience (ABLE) accounts
  • Distributions from Coverdell education savings accounts (ESAs), but only the earnings portion
  • Checking accounts
  • Bonds and notes
  • Certificates of deposit
  • Ginnie Maes
  • Fannie Maes
  • Freddie Macs
  • Repurchase agreements
  • Life insurance dividends
  • Obligations of states and their political subdivisions, other than New Jersey
  • Any other interest not specifically exempt
Forfeiture Penalty for Early Withdrawal
If you incur a penalty by withdrawing a time deposit early, you may subtract the amount of the penalty from your interest income.

Important Notes:

  • You cannot use NJ WebFile if you received more than twelve (12)1099-INT statements.
  • The name of payor field is limited to 35 characters. Please be sure that the name does not exceed this many characters.
  • When you have completed entering your Taxable Interest information, click "Continue" on the bottom of the screen to return to the NJ-1040 screen.
  • If you wish to clear all the information on the Taxable Interest Worksheet, click the "Cancel" button and you will return to the NJ -1040 Screen.
  • Clicking the "Calculate" button will allow you to preview your totals before proceeding.

Tax-Exempt Interest Income
Report all of your tax-exempt interest income from sources both inside and outside of New Jersey, as well as exempt interest dividends from a New Jersey Qualified Investment Fund. Do not report interest earned on your IRA(s) as tax-exempt interest income. Enter the name of each payor from which you received a Form 1099-INT, then enter the corresponding amount of tax-exempt interest income that you received. You cannot use NJ WebFile if you received tax-exempt interest income from more than 12 payors.

New Jersey tax-exempt interest income includes interest from:

  • Obligations of the State of New Jersey or any of its political subdivisions
  • Direct Federal obligations such as U.S. Savings Bonds and Treasury Bills, Notes and Bonds
  • Earnings on qualified distributions from qualified State tuition program accounts, including the New Jersey Better Educational Savings Trust Program (NJBEST) accounts
  • Earnings on qualified distributions from qualified state 529A Achieving a Better Life Experience Program (ABLE) accounts
  • Sallie Maes
  • CATS
  • TIGRs
  • Certain distributions from "New Jersey Qualified Investment Funds"
  • Distributions paid by mutual funds to the extent the distributions are attributable to interest earned on Federal obligations

New Jersey Qualified Investment Funds
A New Jersey Qualified Investment Fund is a regulated investment company in which at least 80% of the fund's investments (other than cash or receivables) are obligations issued either directly by the Federal government or the State of New Jersey or any of its political subdivisions. The Fund must complete and keep Form IF-1, Certification of Qualified Investment Fund, to document its status. This certification does not need to be filed with the Division of Taxation but must be made available upon request.

If you received a distribution from a qualified investment fund, you may exclude from your income only the portion of the distribution which comes from qualified exempt obligations. Although excluded from income, the tax-exempt portion must be reported. The taxable portion of the distribution, if any, is to be reported as dividends. By February 15, shareholders should be notified by the New Jersey qualified investment fund of the portion of their distribution that may be excluded from income. Contact your broker to determine whether your fund qualifies.

For more information on tax-exempt interest income reference Tax Topic Bulletin GIT-5, Exempt Obligations.

Important Notes:
  • You cannot use NJ WebFile if you received more than twelve (12) 1099-INT statements.
  • The Name of Payor field is limited to 35 characters. Please be sure that the name does not exceed this many characters.
  • When you have completed entering your Tax Exempt Interest information, click "Continue" on the bottom of the screen to return to the NJ-1040 screen.
  • If you wish to clear all the information on the Tax Exempt Interest Worksheet, click the "Cancel" button and you will return to the NJ -1040 Screen.
  • Clicking the "Calculate" button will allow you to preview your totals before proceeding.


Dividends and/or Capital Gains Distributions Worksheet
Report all of the dividend income you received during the year (e.g., from stocks, mutual funds) or other income-producing activities which do not constitute a trade or business. The total amount of taxable dividends received, regardless of where earned, must be reported. Enter the name of each payor from which you received a Form 1099-DIV, then enter the corresponding amount of gross dividends, ordinary dividends, and capital gain distributions that you received. You cannot use NJ WebFile if you received more than twelve (12) 1099-DIV statements.

Capital Gains Distributions
Capital gains distributions you receive from mutual funds or other regulated investment companies must be reported here. NJ WebFile will automatically carry these amounts to Schedule B - Net Gains or Income from Disposition of Property. Do not include any portion of a capital gain distribution from a "New Jersey Qualified Investment Fund" which is attributable to qualified exempt obligations or capital gain distributions from mutual funds to the extent attributable to Federal obligations.

Tax-Free Distributions
A distribution which is a return of your investment or capital and does not come from earnings or profits is a nontaxable capital or tax-free distribution. Such distributions reduce the basis of the stock or investment and are not taxable until your investment is fully recovered.

Insurance Premiums
Dividends received from insurance companies are not taxable unless the dividends received exceed the premiums paid. Any interest from accumulated insurance dividends is taxable and must be reported as taxable interest income.

Important Notes:

  • You cannot use NJ WebFile if you received more than twelve (12) 1099-DIV statements.
  • The name of payor field is limited to 35 characters. Please be sure that the name does not exceed this many characters.
  • When you have completed entering your Dividends information, click "Continue" on the bottom of the screen to return to the NJ-1040 screen.
  • If you wish to clear all the information on the Dividends Worksheet, click the "Cancel" button and you will return to the NJ -1040 Screen.
  • Clicking the "Calculate" button will allow you to preview your totals before proceeding.
  • "Gross Dividends" must equal the total of "Ordinary Dividends" plus "Capital Gains Distributions."

Schedule B - Worksheet Net Gains or Income from Disposition of Property
Report all capital gains and income from the sale or exchange of any property. In arriving at your gain, you may deduct expenses of the sale and your basis in the property. The basis to be used for computing gain or loss is the cost or adjusted basis for Federal income tax purposes.

Pursuant to N.J.S.A. 54A:5-15, for taxable years beginning after December 31, 2004, New Jersey income tax law has uncoupled from some provisions of the IRC Section 199 deduction. The New Jersey allowable IRC Section 199 deduction should e taken into consideration in calculating the gain or loss on disposition of applicable property. Information regarding the New Jersey limitations and calculations can be found on the Division's web site (www.state.nj.us/treasury/taxation).

If you sold an interest in a partnership, a sole proprietorship, or rental property, you may be required to use a New Jersey adjusted basis. If you sold shares in an S corporation, you must use your New Jersey adjusted basis. The gain or loss from your sale or liquidation of a sole proprietorship, a partnership interest, or shares of S corporation stock must be reported as net gains or income from disposition of property on Schedule B. For instructions on calculating your New Jersey adjusted basis and the New Jersey gain or loss on disposition of a partnership interest or S corporation shares, partners and shareholders should reference Tax Topic Bulletin GIT-9P, Income from Partnerships, or GIT-9S, Income From S Corporations. For more information, refer to your New Jersey Resident Income Tax Return booklet. All gains derived from installment sales must be reported in the same year as reported for Federal income tax purposes.

List any New Jersey taxable transaction(s) as reported on your Federal Schedule D, indicating the dates you acquired and sold the property, the gross sales price and the cost basis. NJ WebFile will calculate the gain or loss based on the information you provide. Do not include gains or losses from the sale of exempt obligations.

The Gross Income Tax Act does not distinguish between active and passive losses, nor does it authorize carryback or carryforward of such losses. You may deduct Federal passive losses in full in the year incurred against any gain within the same category of income, but only in the year that it occurred.

Capital Gains Distributions
The total amount of all capital gains distributions from your Form 1099-DIV(s) or similar statement(s) will be entered automatically by NJ WebFile based on the information that you input on the Dividends worksheet screen.

Other Net Gains
Enter the total amount of other net gains or income less net losses from disposition of property not previously reported on Schedule B worksheet.

Net Gains
NJ WebFile will automatically calculate your total net gains, netting gains with losses. If the netted amount is a loss, NJ WebFile will enter '0" (zero).

Important Notes:

  • You may combine sales of the same type of property. Enter various or specific date for Date Acquired and enter the date of the last sale in 2017 under Date Sold. You will then combine the Gross Sales Price and Cost/Adjusted Basis for the included items.
  • You may only use NJ WebFile if you have 12 or less kinds of property.
  • The "Kind of Property and Description" field is limited to 35 characters. Please be sure that the name does not exceed this many characters.
  • The Date Sold must be prior to January 1, 2018.
  • When you have completed entering your Net Gains or Income from Disposition of Property information on Schedule B, click "Continue" on the bottom of the screen to return to the NJ-1040 screen.
  • If you wish to clear all the information on the Schedule B Worksheet, click the "Cancel" button and you will return to the NJ -1040 Screen.
  • Clicking the "Calculate" button will allow you to preview your totals before proceeding.

Pensions, Annuities, IRA Withdrawals and Exclusion
Report all taxable pension and annuity distributions you (and your spouse/civil union partner) received during the year. NJ WebFile will calculate the taxable amount based on the information you provide regarding your distributions and whether or not you (and/or your employer) made contributions to the plan. If either you, or your spouse/civil union partner, received more than three (3) 1099-Rs from Pension or annuity distributions you can not use NJ WebFile.

Pensions, annuities and certain IRA withdrawals are taxable on the New Jersey return although the taxable amount may differ from the Federal amount. All state and local government, teachers' and Federal pensions, and Keogh Plans are treated in the same manner as pensions from the private sector. Amounts received as "early retirement benefits" and amounts reported as pension on Schedule NJK-1, Partnership Return Form NJ-1065 are also taxable. Social Security and Railroad Retirement benefits are exempt from New Jersey income tax and should not be reported as pension income. Pension payments received by reason of total and permanent disability are also exempt. However, if you retired before age 65 on a total and permanent disability pension and continue to receive pension payments after age 65, your disability pension is then treated as an ordinary pension.

If you are receiving a United States military pension or survivor's benefit payments, the military pension or survivor's benefit is not taxable for New Jersey gross income tax purposes, regardless of your age or disability status. Do not include such payments.

Military pensions are those resulting from service in the Army, Navy, Air Force, Marine Corps, or Coast Guard. This exemption does not apply to civil service pensions or annuities, even if the pension or annuity is based on credit for military service. Most military pensions and survivor's benefit payments are received from the U.S. Defense Finance and Accounting Service while a civil service annuity is received through the U.S. Office of Personnel Management.

Retirement plans (pensions, annuities, IRAs) are either noncontributory or contributory. A noncontributory plan is one to which you have not made contributions. A contributory plan is one to which you have made contributions, usually through payroll deductions.

Noncontributory Plans
Amounts you receive from noncontributory plans are fully taxable because you have never paid tax on any of the funds in the plan. Enter the total amount of the pension or annuity from your 1099-R.

Contributory Plans (Other Than IRAs)
The total value of your pension or annuity consists of your contributions, your employer's contributions (if any) and earnings. Generally, your contributions to a pension or annuity were taxed when they were made and are not taxed by New Jersey when withdrawn (except for 401(k) Plans). NJ WebFile will determine which method to use to calculate the taxable and nontaxable portions of your distribution (either the Three-Year Rule Method or the General Rule Method) based on the information you provide.

Contributions to Plans Prior to Residence
Any contributions you made to a pension, annuity or IRA prior to moving to New Jersey are treated in the same way as the contributions would have been treated had you resided in New Jersey at the time. Contributions to plans other than 401(k) Plans are considered to have been previously taxed. NJ WebFile will use the appropriate method to determine the taxable amount based on the information you provide.

Lump-Sum Distributions and Rollovers
When a lump-sum distribution of the entire balance from a qualified employee pension, annuity, profit-sharing or other plan is made, the amount received in excess of the contributions to the plan that have already been taxed must be included in your income in the year received. New Jersey has no provisions for income averaging of lump-sum distributions. If the total distribution (taxable and nontaxable portion) is reported in Box 1 of the 1099-R, you will need to calculate the taxable portion if it is not calculated for you in Box 2a. If the taxable amount does appear in Box 2a, when completing the Pension and Annuities Worksheet in NJ WebFile, you will report the amount in Box 2a as the gross distribution as opposed to the amount in Box 1.

A lump-sum distribution from an IRA or a qualified employee pension or annuity plan which you roll over into an IRA or other eligible plan is excludable from New Jersey income if the rollover qualifies for deferral for Federal income tax purposes. The amount rolled over (minus previously taxed contributions) is taxable later when it is withdrawn. As under Federal law, the rollover must be made within the 60-day period after distribution.

401(k) Plans
Beginning on January 1, 1984, New Jersey's treatment of 401(k) Plan contributions changed. After that date employee contributions to 401(k) Plans were no longer included in taxable wages when earned. If you made contributions to your 401(k) Plan prior to January 1, 1984, your distribution will be treated differently than if you made all of your contributions after this date.

All contributions made after January 1, 1984
If all of your contributions to the 401(k) Plan were made after January 1, 1984, then your distributions from the plan are fully taxable unless your contributions exceeded the Federal limit.

Contributions made before January 1, 1984
If you made contributions to the 401(k) Plan before January 1, 1984, or you made contributions beyond the Federal limit, NJ WebFile will calculate the taxable portion of your distributions from the plan using one of the methods described under contributory plans.

For more detailed information on reporting pension and annuity income on your New Jersey return reference Tax Topic Bulletin GIT-1, Pensions and Annuities.

Survivors and Beneficiaries
Generally, pension and annuity income received by a survivor or beneficiary is treated the same way as regular pension or annuity income. Thus, amounts received, whether in the form of periodic payments or in a lump sum, are taxable to the extent that they exceed the decedent's previously taxed contributions to the plan.

Upon the death of the owner of the pension or annuity, the amount paid to the surviving beneficiary is taxable as pension or annuity income to the extent that it exceeds the surviving beneficiary's contribution to the plan. The surviving beneficiary's contribution is determined as follows:

  1. Where the distribution to the surviving beneficiary is subject to taxation by the New Jersey Transfer Inheritance Tax Act,* the contribution of the surviving beneficiary is the value of the annuity, pension or retirement benefits as determined for Transfer Inheritance Tax purposes. The recipient can exclude from gross income tax the amount that represents the contribution, which is the value determined for Transfer Inheritance Tax purposes.

    *Property inherited from a spouse/civil union partner who died on or after January 1, 1985, is not subject to inheritance tax. Transfers to parents, grandparents, children or grandchildren of decedents who died on or after July 1, 1988, are also not subject to inheritance tax. Contact the Division's Inheritance Tax Section at 609-292-5033 for more information.

  2. Where the beneficiary receives benefits which are not subject to Transfer Inheritance Tax, he or she is entitled to exclude from gross income the remaining previously taxed contributions of the decedent. If the decedent's contributions to the plan have already been recovered, all pension income received by the beneficiary is taxable and must be included in gross income.

Pension Exclusion
You qualify for the New Jersey pension exclusion if: (1) You (and/or your spouse/civil union partner if filing jointly) were 62 years of age or older or disabled as defined by Social Security guidelines on the last day of the tax year; and (2) your gross income (combined income if filing jointly) for the entire year before subtracting any pension exclusion was $100,000 or less.

If you qualify, you may exclude all or a part of the income you received during the year from taxable pensions, annuities and IRA withdrawals. To qualify for the New Jersey pension exclusion you must be 62 years of age or over or disabled as defined by Social Security guidelines.

Your pension exclusion will be the lesser of your taxable pension income or the amount of the maximum pension exclusion allowed for your filing status:

Married, filing joint return -- $40,000
Single, Head of Household or Qualifying Widow(er) -- $30,000
Married, filing separate return -- $20,000

If you and/or your spouse/civil union partner were 62 years of age or over at the end of the tax year and did not use the maximum pension exclusion amount for your filing status, or you did not use the pension exclusion because you did not report any income, you may still qualify for other income exclusions.

Important Notes:
  • If either you or your spouse/civil union partner received more than three (3) 1099-R forms for pension or annuity distributions, you can not use NJ WebFile.
  • Depending on how you answer Questions A, B, and C, will allow NJ WebFile to determine which method to use to calculate your taxable pension. Either the three-year Rule Method or the General Rule Method. You will have the opportunity to report your pension distribution as fully taxable if you choose not to complete the three-year rule or General rule worksheet.
  • When you have completed entering your Pensions and Annuity information, click "Continue" to return to the NJ -1040 screen.
  • Clicking the "Cancel" button will clear all of the information from the Pensions and Annuities Worksheet and return you to the NJ -1040 screen.
  • There is a "Calculate" button at the bottom of screen that will allow you to preview your totals before proceeding.

Three-Year Rule Method
If you will recover your contributions within three years from the date you receive the first payment from the plan, and both you and your employer contributed to the plan, NJ WebFile will use the Three-year Rule Method to determine your New Jersey taxable pension income. The Three-year Rule allows you to exclude your pension and annuity payments from gross income until the payments you receive equal your contributions to the plan. Until that time, the amounts you receive, because they are considered your contributions, are not taxable and will not be reported on your return. Once you have received (recovered) an amount equal to the amount you contributed, the payments you receive are fully taxable. Since the Three-year Rule has been repealed for Federal income tax purposes, if you retired after July 1, 1986, the taxable amount of pension or annuity that you report on your New Jersey return when using this method will differ from the amount you report on your Federal return.


General Rule Method
If you will not recover all of your contributions within three years from the date you receive the first payment from the plan, or your employer did not contribute to the plan, NJ WebFile will use the General Rule Method to determine your New Jersey taxable pension income. From the first year you receive your pension and every year thereafter, part of your pension will be excludable (the amount that represents your contributions) and part will be taxable. NJ WebFile will use the information you provide to determine the taxable amount. If life expectancy is a factor in your plan, enter the amount of annual payment and life expectancy "multiple" from the Federal actuarial tables in IRS Publication 939 General Rule for Pensions and Annuities. NJ WebFile will calculate the expected return on contract. Recalculate the percentage only if you annual pension payments decrease. If life expectancy is not a factor, enter only your expected return on contract. The expected return on contract is found by totaling the amounts to be received.
Previously taxed contributions
Enter the amount of contributions that you have made to the plan and which you have already paid tax on.

Life Expectancy
Indicate whether life expectancy is a factor under your plan. If it is, you must then enter the amount of the total annual payment you receive and the appropriate "multiple" value. The "multiple" value can be found in the Federal actuarial tables in IRS Publication 939, General Rule for Pensions and Annuities.

Expected return on contract
If life expectancy is a factor under your plan, NJ WebFile will calculate your expected return based on the information you provided. Otherwise, you must enter the expected return which is the amount receivable.


IRA Withdrawals
Your IRA consists of a nontaxable part (your contributions) and a taxable part (earnings plus certain amounts, if any, rolled over from pension plans). If your contributions have been previously taxed, only the portion of your distribution that represents earnings is taxable.

Earnings credited to an IRA are not subject to tax until withdrawn. The interest, dividends and other earnings, as well as amounts which were tax-free rollovers, will become taxable when withdrawn. If the total amount in the IRA is withdrawn, the entire amount of the interest or accumulated gains becomes taxable in the year the withdrawal is made. If, however, the withdrawal from an IRA is made over a period of years, the portion of the annual distribution that represents interest income and accumulated gains in the IRA is subject to tax. A distribution from a rollover IRA which is fully taxable for Federal income tax purposes may be treated differently for New Jersey purposes if your contributions were subject to New Jersey income tax when the contributions were made.

NJ WebFile will determine the taxable portion of your IRA withdrawal based on the information you provide for each IRA distribution.

IRA Withdrawal Worksheet
You must report all IRA withdrawals you (and your spouse/civil union partner) received during the year. Indicate the number of IRAs from which you (and your spouse/civil union partner if married filing jointly) received a distribution during the year. Enter the corresponding amounts of the IRA distribution, federal withholding (if any) NJ State withholding (if any), the value of each account on 12/31/2017. Also indicate whether this is the first year that a distribution has been made from the particular IRA.

NJ WebFile will calculate the taxable amount based on the information you provide regarding your contribution. If either you (or your spouse/civil union partner) received more than three (3) 1099-Rs for IRA withdrawals you can not use NJ WebFile.

If 2017 was the first year that you received a distribution from this account, NJ WebFile will ask you to enter the total amount of contributions to the account which were previously taxed.

If 2017 was not the first year that you received a distribution from the account, NJ WebFile will ask for information regarding last year's distributions and unrecovered contributions. The information with respect to 2016 can be found on last year's IRA Withdrawal Worksheet.

 

Roth IRAs
Contributions to a Roth IRA are subject to New Jersey tax in the year they are made. However, if the requirements are satisfied, "qualified distributions" from a Roth IRA are excludable and do not have to be included in New Jersey gross income in the year received.

A "qualified distribution" is one made after the five-taxable-year period beginning with the first taxable year in which a contribution was made to your IRA, and which is:

  • Made on or after the date on which an individual reaches age 59; or
  • Made to a beneficiary (or the individual's estate) after the individual's death; or
  • Made because the individual becomes disabled; or
  • Made as a qualified first-time home buyer distribution as defined by the Internal Revenue Code.

A payment or distribution cannot be treated as a qualified distribution if it is made within the five-taxable-year period which begins with the year the first contribution was made. A payment or distribution of an allowable rollover contribution (or income earned on the amount rolled over) from an IRA other than a Roth IRA, is not a qualified distribution if it is made within the five-taxable-year period which begins with the year in which the rollover contribution was made.

If you received a nonqualified distribution from a Roth IRA, you must report the distribution. For example, if you take a distribution of $5000, which represents the full value of the account, including interest earned in the amount of $500, you will need to enter the Payor ID, Gross Distribution amount of $5000, amount of Federal Withholding, if any, amount of NJ State withholding, if any, Value of Account on 12/31/2017 will be $0, if full distribution taken, First Year question should be YES, and the amount of the contributions, less the interest earned $4500, should be entered in the last column. NJ WebFile will then calculated the taxable portion, which in this case will be $500, the interest. If you converted an existing IRA to a rollover Roth IRA during tax year 2017, any amount from the existing IRA that would be taxable if withdrawn must be included in your gross income.

If you converted an existing IRA to a rollover Roth IRA during tax year 2017 any amount from the existing IRA that would be taxable if withdrawn must be included in your gross income.

For more detailed information on IRA withdrawals reference Tax Topic Bulletin GIT-2, IRA Withdrawals or Technical Bulletin TB-44.

Lump-Sum Distributions and Rollovers
When you receive a lump-sum distribution of the entire balance from an IRA account, the amounts you receive which are in excess of your previously-taxed contributions to the IRA are fully taxable and must be included in income in the year you receive them. New Jersey has no provisions for income averaging of lump-sum distributions.

A lump-sum distribution which you roll over (transfer) into an IRA or other eligible plan is excludable from New Jersey income if the rollover qualifies for deferral for Federal income tax purposes. The amount rolled over (minus previously taxed amounts) is taxable later when it is withdrawn. As under Federal law, the rollover must be made within the 60-day period after distribution.

A distribution from a rollover IRA which is fully taxable for Federal income tax purposes may be treated differently for New Jersey purposes if there are contributions remaining in the IRA which were subject to New Jersey income tax when the contributions were made.

Periodic Distributions
If withdrawals from a traditional IRA or nonqualified withdrawals from a Roth IRA are made over a period of years, the portion of the annual distribution that represents interest and accumulated gains (including amounts rolled over and not previously taxed) must be reported as taxable income each year a withdrawal is made. The amount subject to tax is based on the ratio that the taxable portion bears to the total amount in the account.

The formula to determine the taxable portion of an IRA distribution is:

Taxable Portion  X  Distribution = Taxable Amount
Total Value

Total Value means the value of the IRA on December 31 of the tax year plus total IRA distributions during the tax year.

Taxable Portion means the Total Value minus previously taxed contributions.

In the first year a withdrawal is made, contributions means the total amount you contributed to the IRA from the time the account was opened through the end of the tax year in which the first withdrawal was made. (It does not include amounts rolled over and not previously taxed.)

After the first year, the formula for calculating the taxable portion of a distribution remains the same, but the base for each item changes to take into account the fact that both taxable and nontaxable amounts have been withdrawn from the account.

Important Notes:
  • If either you or your spouse/civil union partner received more than three (3) 1099-Rs for IRA withdrawals you can not use NJ WebFile.
  • To complete the section " IRA Distributions" you must refer to your last year's completed Worksheet C - IRA Withdrawals.
  • You must complete the section "IRA Withdrawals Information". If this is not the 1st year you or your spouse/civil union partner is taking a distribution, you must also complete the section "IRA Distributions".
  • When you have completed entering your IRA information, click the "Continue" button on the bottom of the screen to return to the NJ -1040 screen.
  • Clicking the "Cancel" button will clear all of the information on the IRA Worksheet and return you to the NJ - 1040 screen.
  • There is a "Calculate" button at the bottom of the screen that will allow you to preview your totals before proceeding.

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