I didn't do the math, the way I described it is how ProSeries is handling it on the 8915. 1/3 of the tax is due each year. They paid back 1/3 in the first year, which is what would've been taxable, so there are no taxes due in the first year. That is how ProSeries is calculating it on the 8915 and that sounds correct to me. So my question is then on the NJ return. If someone takes a 401k distribution but then immediately pays a  portion of it back is the payback amount tax-exempt to NJ and where do I report that on the NJ-1040?