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

Rpiano
Level 2

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.

 

Rich P.
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qbteachmt
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.

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"Level Up" is a gaming function, not a real life function.

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22 Replies 22
ngosyhan
Level 1

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

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psanger438
Level 3

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!!!

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DiDi
Level 2

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

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qbteachmt
Level 15
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psanger438
Level 3

Still no updates! What is taking Pro Series  so long to fix the Michigan tax return?!?  Really?  This was reported more than two weeks ago and still not fixed!

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qbteachmt
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.

*******************************
"Level Up" is a gaming function, not a real life function.

View solution in original post

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Rpiano
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.
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LouScafidi
Level 2

How did you get the software to carry the full amount on to NJ?

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kc6078
Level 1

Hi -did you ever find how to apply the full amount to NJ?

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psanger438
Level 3

If you check the box "don't spread over three years" on the form 8915-E then the full amount will go to the states return.

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kc6078
Level 1

Thanks for the reply.

I do want to spread it over three years for Federal purposes. But NJ does not allow it and I don't know how to apply for the full amount for NJ only. 

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LouScafidi
Level 2

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

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LouScafidi
Level 2

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)

gsj
Level 1

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.

 

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LouScafidi
Level 2

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)

sc2
Level 1

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?

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kc6078
Level 1

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.

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sc2
Level 1

Thank you

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gsj
Level 1

Hi kc6078,

 

Perhaps I misunderstood, but doesn't your answer contradict what @LouScafidi reported from NJ Dept of Taxation?

 

Also,  according to page 9 of https://www.nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git1&2.pdf, it states "Do not report on your State return a lump-sum distribution you roll over to a traditional IRA or other eligible plan if the rollover qualifies for deferral under federal income tax law."   Since, the Cares Act does provide 1/3rd taxable provisions, so according to this document, shouldn't NJ allow the same rules? 

 

Is there an explicit declaration from NJ which states otherwise?

 

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sc2
Level 1

the passage in the document you reference is pertaining to rollover distributions - it’s  not about 2020 Covid distributions from an IRA or other retirement account.

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qbteachmt
Level 15

Okay, everyone! Let's review:

If you are Not using "ProSeries Tax Preparation Program" to prepare your clients' tax returns then you are in the Wrong Place on the internet.

If you Are using TurboTax, I googled this for you:

https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-my-1099-r/00/26339

So go there and work with your Peer Community there, please. You need to help each other, and you might even be paying for Help for that program, already, and that help will be found at the TurboTax forum. Not this ProSeries forum.

If you are asking for tax help for your own State return, this is Not a tax Q&A site. This is a Software Users' group.

If you are here because a Search Engine Result sent you here, you just got suckered into Marketing or Search Engine Optimization. But this is Not the place for you unless you are using ProSeries Software.

 

 

*******************************
"Level Up" is a gaming function, not a real life function.
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qbteachmt
Level 15

@sc2 

This is a community for how to use ProSeries Tax Programs.

"Turbo Tax places the full amount on Line 20a" <== meaningless here

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 programs, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

 

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"Level Up" is a gaming function, not a real life function.
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