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CHECKLIST OF POSSIBLE NJ ADJUSTMENTS: WHERE AND WHY TO MAKE THEM
See training slides or NJ Special Handling document on taxpre4free 2012 Preparer Page for specific
details on how to make the NJ adjustments
NJ ADJUSTMENTS MADE ON FEDERAL SCREENS
ITEM
TWO SCREEN
Minor Claimed on
Parents’ Return
Main Info screen Box 6a
Additional
Exemption for
Blind/Disabled
Main Info screen –
Blind & Disabled
boxes under Taxpayer Info section
Interest Statement State Adjust column
Interest
Wages
W-2 screen – Box 16
Military Pension
1099-R screen – Box
2 on left bottom of
screen
Railroad
1099-R screen – RR
Retirement Tier 2
box on left bottom
of screen
Disability on 1099-R 1099-R screen – Box
under Line 7 “Check
if Disability & Taxpayer is Disabled”
NJ Lottery
Winnings </= $10K
NJ Estimated Tax
Payments
1/19/2014
W-2G screen – F-1
Help box on left
bottom of screen
F/S Tax Paid – State
section
WHY TO ADJUST
On Federal, minor cannot claim personal exemption for self if
claimed on parents’ return; NJ allows minor to claim personal
exemption for self
Federal allows extra standard deduction for blind (but not
disabled); NJ allows additional exemption for either blind or
disabled
NJ tax law has different taxability rules for certain types of
interest than Federal tax law:
- Interest on US Treasury obligations (taxable for Federal; taxexempt for NJ)
- Interest on Municipal Bonds from states other than NJ
(Tax-exempt for Federal; taxable for NJ)
NJ wages in W-2 Box 16 may be different than Federal wages
in Box 1
Taxable for Federal, but NJ does not tax military pension
Taxable for Federal, but NJ does not tax Railroad Retirement
Tier 2
Federal rule says 1099-R disability pension is considered wages
if taxpayer is < employer's minimum retirement age, but
considered pension if = or > company minimum retirement
age.
NJ does not tax disability from 1099-R if taxpayer is under age
65; disability pensions received after age 65 are taxed as
pensions.
Taxable for Federal, but NJ does not include in taxable income
Taxpayer may have these situations:
 Paid NJ estimated taxes
 Paid balance due for prior years’ taxes in current year
 NJ prior year refund applied to current year taxes
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NJ ADJUSTMENTS MADE ON NJ SCREENS
ITEM
Municipality Code
Domestic Partner
TWO SCREEN
NJ 1040 P1
NJ 1040 P2 – Line 6
Full-time College
Student < 22
Dependent with no
health insurance
NJ 1040 P2 – Line 11
Non-dependent
(Code 0) on Main
Info screen who
may qualify for NJ
EITC
Gubernatorial
Election Fund
Capital Gains - NJ
Exempt Obligations
Pensions
NJ 1040 P2 – Line 13
link to NJ Dependents Worksheet
NJ 1040 P2 – Line 13
link to NJ
Dependents
Worksheet
NJ 1040 P2 – Gubernatorial Election
Fund Boxes
NJ 1040 P2 – Line 18
NJ 1040 P2 – Line 19
Disability on 1099-R NJ 1040 P2 – Line 19
for Taxpayer Older
than Minimum
Retirement Age but
Under 65
PTR/Homestead
Benefit Recoveries
Cancellation of
Credit Card Debt
Pre-tax Medical
Property Taxes/
Rent
NJ 1040 P2 – Line 25
link to NJ Other
Income Statement
NJ 1040 P2 - Line 25
link to NJ Other
Income Statement
NJ 1040 P2 – Line 30
NJ 1040 P3
Worksheet F – Line
1
NJ 1040 P2 – Line
37a
1/19/2014
WHY TO ADJUST
NJ requires Municipality Code
NJ allows $1,000 extra exemption for domestic partner if
he/she does not file NJ return
NJ allows $1,000 extra exemption for any dependent < 22
attending college full time for some part of 5 months
NJ requires check in health insurance box if dependent is not
covered by health insurance
Must manually add a person listed as Non-dependent (code 0)
on Main Info screen on NJ Dependents Worksheet (will not
automatically flow through to NJ return). Otherwise, NJ may
question the amount of the NJ EITC that TW calculates, since
the NJ return may not show all qualifying children for EITC
Must manually check YES or NO to indicate taxpayer’s &
spouse's wishes on contributing to Gubernatorial Election Fund
Taxable for Federal, but NJ does not tax capital gains on NJ taxexempt obligations
May adjust taxable pension amount if taxpayer qualifies to use
NJ 3-year rule for pension
Must subtract disability amount from pension line if taxpayer is
older than minimum retirement age for his company, but
under age 65. If older than minimum retirement age, disabled
box under Box 7 on 1099-R screen would not be checked. This
would cause TW to incorrectly include the disability in NJ 1040
Line 19 pension income
May be taxable as income on Federal Other Income Line 21,
but NJ does not tax PTR/Homestead Benefit Recoveries
Cancellation of credit card debt may be taxable on Federal
Other Income Line 21, but NJ does not tax this Cancellation of
Debt income
Pre-tax medical cannot be claimed on Federal Sch A as medical
expenses. However, since these expenses are not pre-tax for
NJ (state wages on W-2 will be higher than Federal wages),
they can be claimed as medical expenses on NJ 1040 Line 30
Real estate taxes from Federal Sch A are transferred to
Worksheet F, but must still be manually entered on Line 1. PTR
recipients can only claim base year amount; all other homeowners can claim Sch A amount. Tenants can claim rent paid;
TW will calculate 18% as property taxes
If base year amount used on Worksheet F for PTR recipients,
must adjust Line 37a via scratch pad to be Total Property Taxes
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Use Tax
NJ E-file
IRA Distribution
Direct Deposit/
Debit
1/19/2014
NJ 1040 P3 – Line
37b
NJ 1040 P3 – Line 45
NJ 1040 P3 –
Bottom of screen
NJ IRA Worksheet
NJ DD Worksheet
Paid
Must check box if taxpayer was homeowner on 10/1 of current
tax year
NJ requires taxpayer to pay use tax on out-of-state & internet
purchases that did not charge NJ sales tax. Also must pay use
tax if tax rate charged was < NJ's 7% sales tax rate
Must indicate whether NJ return should be e-filed. Must also
check box if NJ return is to be sent unlinked from Federal
NJ allows taxpayer contributions to an IRA to be tax-exempt at
time of distribution on a pro-rated basis (since taxed at time of
contribution). Must complete NJ IRA Worksheet to calculate
how much can be tax-exempt. Also must fill in IRA number on
worksheet (even if you don't have info to calculate tax-exempt
amount), or TW will not include any IRA income on NJ 1040
Must indicate taxpayer’s wishes for refund or balance due. If
direct deposit/debit is chosen, must enter routing & account
numbers twice if different account used than on Federal or if
Federal was a balance due while NJ is a refund
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NJ ADJUSTMENTS HANDLED AUTOMATICALLY BY TWO
ITEM
Additional Exemption for 65 & Older
Social Security
TWO SCREEN
NJ 1040 P2 – Line 7
Railroad Road
Retirement Tier 1
Early Withdrawal
Penalty on 1099INT
Capital Losses
----------
----------
NJ 1040 P2 – Line
15a
NJ 1040 P2 – Line 18
Disability on 1099-R NJ 1949 P2 – Line 19
Received under Age
65
Gambling
Winnings/Losses
Pension Exclusion
& Other Retirement Income
Exclusions
Medical Expenses
NJ 1040 P 2 – Line
23
NJ 1040 P2 – Line 27
Earned Income Tax
Credit
Property Taxes
NJ 1040 P3 – Line 51
Net Profit from
Business
NJ Bus 1 & 2
1/19/2014
NJ 1040 P2 – Line 30
NJ 1040 P3 –
Worksheet F
NJ 1040 P3 –
Worksheet F
WHY TO ADJUST
TW automatically allows additional exemption for taxpayer age
65 & older as of 12/31 of current tax year
TW automatically excludes Social Security from NJ taxable
income
TW automatically excludes RR Retirement Tier I from NJ
taxable income
TW automatically subtracts any early withdrawal penalty
shown on 1099-INT from Taxable Interest on Line 15a (Federal
puts early withdrawal penalty as Adjustment to Income)
TW automatically excludes any net capital losses from NJ Line
18
TW automatically excludes any disability pension on a 1099-R
from NJ taxable income if the taxpayer is under age 65 & the
box that says, “Check if disability & the taxpayer is disabled”
below Box 7 on1099-R is checked
TW automatically nets gambling losses against winnings before
populating Line 23 (cannot be < 0)
TW automatically calculates the appropriate Pension Exclusion
& Other Retirement Income Exclusions on Lines 27a-c for
eligible taxpayers
TW automatically calculates the taxpayer’s medical expenses >
2% of NJ gross income on Line 30 (vs. 10%/7½% of AGI on
Federal)
TW automatically calculates the appropriate earned income
tax credit (20% of Federal EIC amount)
TW automatically calculates whether the NJ property tax
deduction or credit is more beneficial for taxpayer
TW automatically excludes real estate taxes paid on any
property other than main residence from the property tax
amount transferred from Sch A to Worksheet F
TW automatically completes the NJ BUS 1 & 2 worksheets as
needed for net profits from business (Schedules C & E on
Federal)
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