TurboTax used used wrong income for NJ taxes and we owe big!

Forum|Forum|2 years ago
January 23, 2024
2 replies
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Just heard from the IRS that we over $800 for a mistake on our 2020 taxes. Apparently our gross income was higher in New Jersey because my husband contributed to a 403-b plan and his contributions are not counted toward taxable income federally but in New Jersey they ARE. Sadly TurboTax automatically pulls the federal gross income figure and uses it on the NJ state return. In our case the amount was $18,000 less than our NJ gross income should have been. There was NO question in Easy Step to alert me to this. In fact I read a forum post from someone who had the same issue and he reported that TurboTax wouldn't allow him to CORRECT the figure! We now owe tax and penalties for 2020. We're going to get hit with two more big tax bills once New Jersey goes over our 2021 and 2022 tax returns. My mistake was to trust TurboTax and I don't see how I can ever use the product again! Is there any way to report correct annual income in NJ for people who contribute to a retirement account that's not a 401-k?

DMarkM1

Neither TurboTax nor NJ use the federal adjusted gross income to report state wage income. Both use box 16 from forms W2. For NJ the box 1 amount typically will be lower than the box 16 amount due to items such as 403b contributions that are taxable in NJ but not federally.

Entering the W2 information correctly will ensure the NJ wage amount will be correct and include the taxable retirement plan contributions. Compare your W2 box 16 amounts to the amounts reported on line 15 of form NJ-1040.

Additionally in your prints/downloads of your tax forms you will find a "Wage and Tax Statement" which will show the entries made for forms W2.

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cpagetleakeAuthor

Thanks for your reply. There was a higher amount in box 16 but TurboTax nevertheless used the federal gross amount for both federal and NJ taxes. Not sure why. I answered every question presented in Easy Step with great care and there was no question, as far as I know, that asked if his NJ wages were different than federal. One Hundred percent of husband's income was earned New York, so we didn't even think he would owe NJ taxes on it! Whatever. Had the error occurred and had I experienced what another person reported--he got an error from TurboTax saying he wasn't "permitted" to override the amount!!--I'd have flipped out, knowing how long I'd be on the phone trying to get it straightened out. I'm almost glad the IRS just told us how much we owe, than to through that.

fanfare

Employee

You will amend your NY resident return to get a credit for additional tax paid to NJ/

@cpagetleake

Generally, you must file an amended return within 3 years after the date you filed your original return or 2 years after the date you paid the tax, whichever is later.

ulia77

Turbotax messed up our 2021 NJ NY calculations as well (taxes paid to other jurisdictions).

It used a wrong amount in income actually taxed by NY (combined both of our incomes, earned in NJ and NY, not just NY) on NJ-COJ, resulting in using 70% instead of 37% for maximum calculations. Got audited by NJ and now own interest for 2 year and penalty, besides the underpaid tax. So much for 100% accuracy guaranteed.

TomD8

Employee

@ulia77 --

A TurboTax error affecting NY/NJ returns would have affected thousands of users, which didn't happen.

Just guessing, but did you complete your non-resident NY return before you did your home state NJ return (assuming that you're residents of NJ)? Completing the returns in the incorrect order could result in an incorrect NJ-COJ form.

In order for the "other state credit" to be correctly calculated by TurboTax, the non-resident state return must be completed first, before the home state return.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

danmacsr

I have the same problem on the 2021 Tax return.

My NJ State Tax return on line 48 shows one amount and on my NY State tax return line 41 shows a different and much higher amount and now we owe taxes and interest owed to NY. How did this happen?