How do I account for this IRA on my N.J. tax return?


Q. In 2019, I contributed to a non-deductible IRA and then immediately converted it to Roth IRA. The brokerage company issued a 1099-R indicating the full IRA disbursement as a premature withdrawal. On my New Jersey return, should I show the amount from the 1099-R on line 20a despite the fact that my 2019 contribution was non-deductible and there was no growth in the IRA?
— Still working

A. Your strategy, known as a backdoor IRA,  is a strategy to end up with a valuable tax-free Roth IRA when you might not otherwise qualify because of Roth income limits.

For federal and NJ purposes, the rollover is not taxable unless the amount rolled into the Roth exceeded the amount contributed, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

The brokerage company has no choice but to issue the 1099-R in that manner, Karu said.

“Do not enter it as a taxable transaction,” he said. “If I were preparing the New Jersey return, I would include it on both lines 20a and 20b.”

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This story was originally published on May 20, 2020. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.