Partial Roth IRA conversion in NJ w/ non-deductible contributions etc

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sirrastusbear
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Joined: Wed Apr 22, 2020 8:49 pm

Partial Roth IRA conversion in NJ w/ non-deductible contributions etc

Post by sirrastusbear »

I'm a New Jersey resident looking to do a partial Roth conversion for the first time. I have three IRAs:

- Traditional IRA (contains both deductible and non-deductible contributions; some made as NJ resident and some as non-resdient)
- SEP-IRA (contributions made only as non-resident)
- Rollover IRA (401k rollovers, all pre-tax)

I would like to convert a small amount of the Traditional to a Roth. For federal, I will aggregate the accounts and report as income the pro-rata withdrawal amount using the non-deductible basis of my traditional IRA (form 8606).

For NJ, the income tax instructions (NJ1040 line 21) and publication GIT-2 state: "Use Worksheet C to calculate the taxable and excludable portions of your IRA withdrawal. If you made withdrawals from multiple IRAs, you can use a separate worksheet for each or combine all IRAs on one worksheet."

My questions/concerns:
1) Can I isolate the traditional IRA for this calculation (and not aggregate my other IRAs)? This would obviously change the non-taxable amount quite significantly vs federal, as my rollover balance is much larger than my traditional/SEP.
2) Regardless of isolation, are the deductible contributions I made to my traditional IRA and SEP-IRA considered "unrecovered contributions" and included in my NJ non-taxable basis even though I was a non-resident at the time of contribution? The publication says: "Any contributions you made to an IRA or a Roth IRA before you moved to New Jersey are treated the same way as if you had been living in New Jersey when you made the contributions."
3) Are there any record keeping suggestions in addition to saving the worksheet? There is no Form 8606 for NJ.

Thanks for reading!
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grabiner
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Re: Partial Roth IRA conversion in NJ w/ non-deductible contributions etc

Post by grabiner »

sirrastusbear wrote: Fri Jul 30, 2021 8:46 am 2) Regardless of isolation, are the deductible contributions I made to my traditional IRA and SEP-IRA considered "unrecovered contributions" and included in my NJ non-taxable basis even though I was a non-resident at the time of contribution? The publication says: "Any contributions you made to an IRA or a Roth IRA before you moved to New Jersey are treated the same way as if you had been living in New Jersey when you made the contributions."
This is correct. If you had filed a NJ tax return for those years, you would have reported the contributions as non-deductible, since NJ does not allow a deduction. Therefore, you can count these amounts as part of your basis.

For the rollover IRA, NJ would have allowed a deduction for 401(k) contributions, so your basis in that IRA is zero.
Wiki David Grabiner
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