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Are salary deferrals under 409a allowable under NJ tax law?

Are salary deferrals under 409a allowable under NJ tax law?
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Customer reply replied 1 month ago
Meant to ask if 409a deferrals are deductible when figuring out NJ taxable w2 wages.
Answered in 5 hours by:
3/12/2018
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 940
Experience: Former IRS Revenue Agent
Verified

I'm Fiona, former IRS revenue agent. I am looking at your question and will get back to you soon. Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP,IMTA

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Dear Customer,

The answer is no. New Jersey does not allow 409A deferral plan deduction. Below are the resources and quotations for your further references.

Please feel free to follow up.

Regards,

Fiona

According to the IRS website,

https://www.irs.gov/retirement-plans/409a-nonqualified-deferred-compensation-plans

"What is IRC Section 409A?

Section 409A applies to compensation that workers earn in one year, but that is paid in a future year. This is referred to as nonqualified deferred compensation. This is different from deferred compensation in the form of elective deferrals to qualified plans (such as a 401(k) plan) or to a 403(b) or 457(b) plan."

According to the website of New Jersey, Division of Taxation stated that,

http://www.state.nj.us/treasury/taxation/njit5.shtml

"The wages you report for federal tax purposes may be different than the wages you report for New Jersey purposes. For example:

  • New Jersey does not allow you to exclude from wages amounts you contribute to deferred compensation and retirement plans, other than 401(k) Plans."
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Customer reply replied 1 month ago
the IRS allows it but NJ doesn't?

Dear Customer,

The IRS website quotation is to explain what the 409A definition is.

The New Jersey only allows 401(k) type of deduction. The comparison of the two is to show that 409A is not similar to 401(K)

Your posted question is whether New Jersey allows the deduction or not.

Regards,

Fiona

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Dear Customer,

Your second question on whether IRS allows it or not is a relatively in-depth and involved question. It is not a simple yes or no issue.

Please consult with the IRS website link on 409A plan below for your further reference. You may find it interesting.

https://www.irs.gov/newsroom/frequently-asked-questions-sec-409a-and-deferred-compensation

Regards,

Fiona

Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 940
Experience: Former IRS Revenue Agent
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