Arizona booklet X 2010 vol. 1 |
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Arizona Booklet X 2010 VOLUME 1 This booklet contains: Individual Tax Forms Corporation, Partnership, and Exempt Organization Tax Forms CAUTION The federal amounts that you use on your Arizona return may not be the same as the federal amounts from your federal tax return. Each year the Arizona State Legislature considers if they will adopt changes made to the federal tax law during the prior year. These forms assume the Legislature will adopt all federal law changes made after January 1, 2010. If you use the amounts from your 2010 federal tax return to complete your Arizona return and the Legislature does not adopt the 2010 federal changes, you may have to amend your return at a later date for any difference between Arizona and federal law. For more details, visit www.azdor.gov and click on the link for 2010 conformity. QUICK AND EASY ACCESS TO TAX HELP AND FORMS PERSONAL COMPUTER You may use a personal computer and modem to get the forms and information you need. Here is a sample of what you will fi nd when you visit our web site at www.azdor.gov: • Forms and Instructions • Brochures • Tax Rulings and Procedures • Other General Tax Information PHONE Information by phone... Individual and Corporate Income Tax: Phoenix...................................... (602) 255-3381 Toll-free from area codes 520 and 928 ............ (800) 352-4090 Withholding Tax: Phoenix...................................... (602) 255-2060 Toll-free from area codes 520 and 928 ............ (800) 843-7196 Hearing Impaired TDD User: Phoenix ..................................... (602) 542-4021 Toll-free from area codes 520 and 928.... (800) 397-0256 WALK-IN SERVICE You may get forms and information at any of our offi ces. We have offi ces at the following locations: Phoenix 1600 West Monroe Gilbert 275 East Germann Road Building 2, Suite 180 Tucson 400 West Congress Reasonable accommodations for any person with a disability can be made. Tax software does all the hard work for you! The software: Calculates Tax Does the Math Selects Forms and Schedules Makes Complex Returns Simple Checks for Errors Before You File E-Files the IRS and AZ Returns at the same time Gives Proof of E-Filing www.azdor.gov For details & eligibility Did You Know? FREE E-Fi l e Avai lable Notice As a rule, the starting point for your Arizona return is your federal adjusted gross income. To take itemized deductions, you must start with the amount shown on the federal Schedule A. This is the case for 2010, except for changes Congress made to the federal tax code during 2010 and the following apply. 1. The changes affect how you figure your federal adjusted gross income. AND/OR 2. The changes affect how you figure your itemized deductions. When federal changes are made, Arizona legislature must adopt those changes if the Arizona starting points are to be kept the same. The legislature will address this issue when it is in session during 2011. We must publish these forms before this issue will be addressed by the legislature. When we went to print, Arizona had not yet adopted any federal tax law changes made after January 1, 2010. What does this mean to you? It means that if any of the federal law changes made in 2010 apply to your 2010 return, you can opt to file your 2010 return using one of the following methods. 1. You can wait and file your 2010 return after this issue has been addressed. To do this, you may need to ask for a filing extension. You must pay 90% of the tax due by the due date of the return before any extension. 2. You can file your 2010 return assuming that the federal law changes will be adopted. If you opt for method 2, one of the following will apply. If Arizona adopts those changes, you do not have to do anything more. If Arizona does not adopt all those changes, you may need to amend your 2010 Arizona return. Your amended return will have to show the difference between the Arizona law and the federal law. If this happens, we will post more details at http://www.azdor.gov, you will need to click on the link for 2010 conformity. 3. You can file your 2010 return assuming that we will not adopt the federal law changes. If you opt for this method, you will have to do the following. You will have to research all of the federal changes made after January 1, 2010. You will have to figure out if any of those changes apply to you. You will have figure out how to make adjustments for those changes on your return. If you opt for method 3, one of the following will apply. If Arizona does not adopt those changes, you do not have to do anything more. If Arizona adopts those changes, you may need to amend your 2010 Arizona return. Your amended return will have to show the difference between what you reported and what you should have reported. If this happens, we will post more details at http://www.azdor.gov, you will need to click on the link for 2010 conformity. THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 1 CONTENTS Individual Tax Forms 131 Claim for Refund on Behalf of Deceased Taxpayer ........................................................................................ 1 140 Series Info Items of Interest ......................................................................................................................................... 3 140 Resident Personal Income Tax Return .......................................................................................................... 5 140 Schedule A Itemized Deduction Adjustments ................................................................................................................31 140A Resident Personal Income Tax Return (Short Form)......................................................................................33 140EZ Resident Personal Income Tax Return (EZ Form) ..........................................................................................49 140PY Part-Year Resident Personal Income Tax Return ..........................................................................................61 140PY Schedule A(PY) Itemized Deductions for Part-Year Residents...............................................................................................89 140PY Schedule A(PYN) Itemized Deductions for Part-Year Residents With Nonresident Income........................................................93 140NR Nonresident Personal Income Tax Return ....................................................................................................97 140NR Schedule A(NR) Itemized Deductions for Nonresidents.......................................................................................................119 140ES Individual Estimated Income Tax Payment (2011) .....................................................................................121 140ET Credit for Increased Excise Taxes ..............................................................................................................125 140PTC Property Tax Refund (Credit) Claim............................................................................................................131 140X Individual Amended Income Tax Return.....................................................................................................139 200 Request for Innocent Spouse Relief and Separation of Liability and Equitable Relief..................................149 201 Renter's Certificate of Property Taxes Paid................................................................................................159 202 Personal Exemption Allocation Election ....................................................................................................161 204 Application for Filing Extension (Individual)...............................................................................................163 221 Underpayment of Estimated Tax by Individuals..........................................................................................165 Tables Tax Tables ...............................................................................................................................................171 THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 1 CONTENTS Corporation, Partnership, and Exempt Organization Tax Forms 51 Combined or Consolidated Return Affiliation Schedule .............................................................................181 99/99T Info Exempt Organization Information Sheet ....................................................................................................185 99 Arizona Exempt Organization Annual Information Return ...........................................................................187 99T Arizona Exempt Organization Business Income Tax Return.........................................................................191 Corp. Info. Corporate Income Tax Highlights...............................................................................................................201 120 Arizona Corporation Income Tax Return.....................................................................................................203 120A Arizona Corporation Income Tax Return (Short Form) .................................................................................223 120ES Corporation Estimated Tax Payment (2011) ..............................................................................................237 120EXT Application for Automatic Extension of Time to File Corporation, Partnership, and Exempt Organization Returns .............................................................................................................239 120S Arizona S Corporation Income Tax Return..................................................................................................243 120S Schedule K-1(NR) Nonresident Shareholder's Share of Income and Deductions ....................................................................255 120W Estimated Tax Worksheet for Corporations (2011).....................................................................................257 120X Arizona Amended Corporation Income Tax Return .....................................................................................263 122 Authorization and Consent of Subsidiary Corporation to be Included in a Consolidated Income Tax Return...............................................................................................................................................271 165 Arizona Partnership Income Tax Return .....................................................................................................273 165 Schedule K-1 Resident Partner's Share of Adjustment to Partnership Income .................................................................285 165 Schedule K-1(NR) Arizona Nonresident and Out-of-State Partner's Share of Income and Deductions .....................................287 Schedule 165 EER Subtraction for Sale of New Energy Efficient Residences............................................................................289 220 Underpayment of Estimated Tax by Corporations.......................................................................................291 Schedule ACA Air Carrier Apportionment........................................................................................................................301 THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 2 CONTENTS Tax Credit Forms 300 Nonrefundable Corporate Tax Credits and Recapture ................................................................................303 301 Nonrefundable Individual Tax Credits and Recapture.................................................................................309 302 Defense Contracting Credits .....................................................................................................................315 304 Enterprise Zone Credit ..............................................................................................................................317 305 Environmental Technology Facility Credit ..................................................................................................329 306 Military Reuse Zone Credit........................................................................................................................337 307 Recycling Equipment Credit......................................................................................................................349 308 Credit for Increased Research Activities ....................................................................................................351 308-I Credit for Increased Research Activities - Individuals.................................................................................359 309 Credit for Taxes Paid to Another State or Country.......................................................................................369 310 Credit for Solar Energy Devices .................................................................................................................381 312 Agricultural Water Conservation System Credit..........................................................................................385 315 Pollution Control Credit ............................................................................................................................389 318 Credit for Taxes Paid for Coal Consumed in Generating Electrical Power.....................................................393 319 Credit for Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlets .....................397 320 Credit for Employment of TANF Recipients.................................................................................................407 321 Credit for Contributions to Charities That Provide Assistance to the Working Poor ......................................415 322 Credit for Contributions Made or Fees Paid to Public Schools ....................................................................419 323 Credit for Contributions to Private School Tuition Organizations.................................................................423 325 Agricultural Pollution Control Equipment Credit ........................................................................................427 331 Credit for Donation of School Site .............................................................................................................431 332 Credit for Healthy Forest Enterprises .........................................................................................................435 333 Credit for Employing National Guard Members..........................................................................................445 334 Motion Picture Credits.............................................................................................................................451 334-E Transferee Notice of Transfer of Motion Picture Credits..............................................................................463 334-O Transferor Notice of Transfer of Motion Picture Credits ..............................................................................465 335 Credit for Corporate Contributions to School Tuition Organizations ............................................................467 336 Credit for Solar Energy Devices - Commercial and Industrial Applications ..................................................471 337 Credit for Water Conservation System Plumbing Stub Outs ........................................................................479 338 Credit for Investment in Qualified Small Businesses ..................................................................................483 339 Credit for Water Conservation Systems......................................................................................................487 THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 2 CONTENTS Tax Credit Forms (continued) 340 Credit for Donations to the Military Family Relief Fund...............................................................................489 341 Credit for Corporate Contributions to School Tuition Organizations for Displaced Students or Students With Disabilities...................................................................................................................491 342 Credit for Renewable Energy Industry ........................................................................................................495 Fiduciary Tax Forms 141AZ Arizona Fiduciary Income Tax Return .........................................................................................................499 141AZ Schedule K-1 Resident or Part-Year Resident Beneficiary's Share of Fiduciary Adjustment ..............................................515 141AZ Schedule K-1(NR) Nonresident Beneficiary's Share of Income and Share of Fiduciary Adjustment..........................................517 141AZ EER Subtraction for Energy Efficient Residences ..............................................................................................519 141AZ ES Estate or Trust Estimated Income Tax Payment (2011)...............................................................................521 141AZ EXT Application for Filing Extension (Fiduciary) ................................................................................................523 210 Notice of Assumption of Duties in a Fiduciary Capacity ..............................................................................525 Withholding Tax Forms A1-APR Arizona Annual Payment Withholding Tax Return .......................................................................................527 A1-APR EXT Application for Extension of Time to File the Arizona Annual Payment Withholding Tax Return.....................533 A1-QRT Arizona Quarterly Withholding Tax Return..................................................................................................535 A1-WP Payment of Arizona Income Tax Withheld ..................................................................................................545 A1-C Arizona Charitable Withholding Statement (2011) ....................................................................................547 A1-R Arizona Withholding Reconciliation Return................................................................................................551 A1-R EXT Application for Extension of Time to File the Arizona Withholding Reconciliation Return .............................555 A1-E Employer’s Election to Not Withhold Arizona Taxes in December (2011).....................................................557 A-4 Employee's Arizona Withholding Percentage Election and Employee’s Instructions (2011) ........................559 Instructions Employer’s Instructions for Form A-4.........................................................................................................561 A-4P Annuitant's Request for Voluntary Arizona Income Tax Withholding (2011)................................................563 A-4V Voluntary Withholding Request for Arizona Resident Employed Outside of Arizona (2011)..........................565 WEC Withholding Exemption Certificate (2011).................................................................................................567 WECI Withholding Exemption Certificate, Native Americans (2011) ....................................................................569 WECM Withholding Exemption Certificate for Military Spouses (2011) .................................................................571 Miscellaneous Tax Forms 285 General Disclosure/Representation Authorization Form...........................................................................573 450 Request for Certified Copies of Documents ..............................................................................................577 THIS PAGE INTENTIONALLY LEFT BLANK REVENUE USE ONLY. DO NOT MARK IN THIS AREA. 88 81 80 Claim for Refund on Behalf of Deceased Taxpayer Please print or type. ADOR 10412 (10) Previous ADOR 91-0010 ARIZONA FORM 131 SCHEDULE A: Complete only if you checked box (c) above. 12 Did the decedent leave a will? .................................................................................................................................... 12 a Has a personal representative been appointed for the estate of the decedent? .......................................................... 12a b If “No”, will one be appointed? ..................................................................................................................................... 12b If you answered “Yes” to 12a or 12b, do not fi le this form. The personal representative should fi le for the refund. 13 As the person claiming the refund for the decedent’s estate, will you pay out the refund according to the laws of the state where the decedent was a legal resident? ......................................................................................................... 13 If you answered “No”, a refund cannot be made until you submit a court certifi cate showing your appointment as personal representative or until you submit other evidence that you are entitled under state law to receive the refund. 4 Number and Street (permanent residence or domicile on date of death) 5City State Zip Code 6 Name of Person Claiming Refund (last, fi rst, middle initial) 7 Relationship to Decedent 8 Claimant’s Social Security or Federal I.D. No. 11 I am fi ling this claim as (check only one box): a Surviving spouse claiming a refund based on a joint return. b Court Appointed Personal Representative for the decedent’s estate. Attach a court certifi cate (issued after death) showing your appointment. c Person other than 11a or 11b claiming refund for the decedent’s estate. Complete Schedule A below, and attach a copy of the death certifi cate or proof of death. Please attach requested information and sign below. If you checked box 11c, complete Schedule A. • Attach this form to the front of the income tax return that would have been fi led if the decedent had lived. • If the refund is issued in the name of the decedent, it may be cashed with the endorsement of the executor or administrator of the estate. • Attach any required documents, certifi cates, etc., to this form. • For military personnel, the original or an authentic copy of a telegram or letter from the Department of Defense notifying the next of kin of the decedent’s death while in active service, or a death certifi cate issued by the Department of Defense will be suffi cient proof of death. • As the surviving spouse or personal representative, you may be required to fi le a fi duciary return (Form 141AZ) for the decedent’s estate. For further information concerning this form, call (602) 255-3381, or toll-free from area codes 520 and 928, call (800) 352-4090. NOTE: If you are a surviving spouse who fi led a joint return without Form 131 and you have already received a refund check in your name and your deceased spouse’s name, you may return the joint-name check with Form 131. We will issue a new check in your name and we will mail the new check to you. If this applies to you, send Form 131 along with the joint-name check to: Arizona Department of Revenue, PO Box 52138, Phoenix, AZ 85072-2138. OR OTHER TAX YEAR BEGINNING M M D D Y Y Y Y AND ENDING M M D D Y Y Y Y . I request a refund of taxes overpaid by, or on behalf of, the decedent. Under penalties of perjury, I declare that the statements made on this form have been examined by me and to the best of my knowledge, they are true, correct and complete. Signature of Person Claiming Refund Date YES NO Instructions FOR CALENDAR YEAR 20YY 9 Number and Street of Person Claiming Refund 10 City State Zip Code 1 Decedent’s Name (last, fi rst, middle initial) 2 Date of Death 3 Decedent’s Social Security No. M M D D Y Y Y Y 1 THIS PAGE INTENTIONALLY LEFT BLANK 2 Items of Interest for 2010 Extra Time for Filing 2010 Returns You have extra time to file and pay for 2010 because April 15, 2011 is a legal holiday in Washington DC. This means that your 2010 calendar year tax return is due no later than midnight, April 18, 2011. 2010 Standard Deduction the Same as 2009 For 2010, the standard deduction is the same as it was for 2009 ($4,677 for a single taxpayer or a married couple filing separate returns and $9,354 for a head of household or a married couple filing a joint return). Haiti Earthquake Relief Donations Made in 2010 but Deducted on Your 2009 Federal Return. For Arizona purposes, you must deduct any donations for Haiti relief that you made during 2010 on your 2010 Arizona return. If you deducted these donations on your 2009 federal income tax return, you must add that amount back on the 2009 Arizona return and then deduct it on your 2010 Arizona return. Discharge of Indebtedness (DOI) Income under I.R.C § 108(i) If you made the federal election to defer the inclusion of DOI income under I.R.C. § 108(i), you must make an addition to Arizona income for the amount of DOI that you deferred and excluded from your 2010 federal adjusted gross income. In future years when you include that income on your federal income tax return, you will be allowed to take a subtraction for the amount already included in Arizona income. Original Issue Discount (OID) on Reacquisition of Debt Instrument Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the taxpayer deferred the DOI income under I.R.C. § 108(i). In this case a taxpayer may subtract any OID deduction that was deferred on the federal return. In future years when the taxpayer takes this deduction on the federal return, the taxpayer will be required to make an addition to Arizona income for the amount of OID already subtracted for Arizona purposes. Special Net Operating Loss (NOL) Subtraction Rules for Losses Carried Forward from 2008 or 2009 Arizona did not adopt the federal net operating loss rules [I.R.C. § 172(b)(1)(H)] for losses incurred during 2008 or 2009. For Arizona purposes, you must deduct the loss as if you computed the loss under I.R.C. § 172 in effect prior to the enactment of those rules. An Arizona subtraction will be allowed for the difference between the actual carryforward on the federal return and the carryforward that would have been allowed as a deduction on the federal return if the election had not been made. New Refund Check-off for the “I Didn’t Pay Enough Fund’ You may give some or all of your refund to the I Didn’t Pay Enough Fund. Gifts that you make to the I Didn’t Pay Enough Fund will aid the state by going to the Arizona general fund. Nonresidents Must Now Prorate the Standard Deduction Nonresident individuals, who claim the standard deduction, must now prorate the deduction by the percentage which the taxpayer’s Arizona gross income is of the taxpayer’s federal adjusted gross income. Private School Tuition Credit If you make a donation to a private school tuition organization between January 1, 2011 and April 15, 2011, you may opt to take a credit for this donation on your 2010 return. If you do not take the credit for this donation on your 2010 return, you may take the credit on your 2011 return. See Form 323 for details. New Refundable Renewable Energy Industry Credit A taxpayer may qualify for the refundable renewable energy industry credit if the taxpayer expanded or located a qualified renewable energy operation in Arizona. See Form 342 for details. Portion of R & D Credit May Now be Refundable Starting with the 2010 taxable year, a portion of the R & D credit may be refundable to qualified taxpayers. See Form 308-I for details. Innocent Spouse Relief Form 200 Revised We have revised the Form 200 to help us process the form faster. The new Form 200 asks for a lot more information. We know that some of the questions on this form involve sensitive subjects, but we need this information to determine whether a taxpayer qualifies for relief. New Estimated Payment Form for Form 141AZ Filers A fiduciary making estimated income tax payments on behalf of an estate or trust should use new Form 141AZ ES rather than Form 140ES to make those payments. New Extension Request Form for Form 141AZ Filers A fiduciary filing for an Arizona extension or making an Arizona extension payment on behalf of an estate or trust should use new Form 141AZ EXT rather than Form 204. Special Notice for 2009 Returns Arizona did not fully conform to federal tax law changes for 2009. This means that you may have to file an amended return for 2009. Look at items 1 through 5 below. See if any of those items apply to you. If any of those items apply to you, this will affect your 2009 return. If you have already filed your 2009 return, you must file an amended return to properly report those items. If you were a full year resident during 2009 and you filed Form 140, 140A or 140EZ, you may use Form 140X-NC to correct your 2009 return. If you file Form 140X-NC and pay the entire tax due by October 17, 2011, we will not charge you any penalty or interest on that tax. The following is the list of items that affect your 2009 return. 1. You received unemployment income during 2009. You excluded up to $2,400 of that income on your 2009 federal return. 2. You claimed an itemized deduction for both the sales tax on a new motor vehicle and state income taxes on your 2009 federal return. 3. You made a cash gift during 2010 to aid Haiti earthquake victims. You claimed an itemized deduction for that gift on your 2009 federal return. 4. You elected to exclude discharge of indebtedness (DOI) income from the reacquisition of a business debt instrument on your 2009 federal return. 5. You excluded original issue discount (OID) on a debt instrument described in number 4 above from income on your 2009 federal return. If any of items 1 through 5 above apply to you, you must correct your 2009 Arizona return. To get Form 140X-NC or for more news on this topic, visit our web site at www.azdor.gov. 3 THIS PAGE INTENTIONALLY LEFT BLANK 4 88 81 80 REVENUE USE ONLY. DO NOT MARK IN THIS AREA. 98 C= Checking or S= Savings Direct Deposit of Refund: Check box 57A if your deposit will be ultimately placed in a foreign account; see instructions. 57A ROUTING NUMBER ACCOUNT NUMBER ONE STAPLE. NO TAPE. Aid to Education (entire refund only) ......... 42 00 Arizona Wildlife ............. 43 00 Citizens Clean Elections .. 44 00 Child Abuse Prevention ... 45 00 Domestic Violence Shelter ......................... 46 00 I Didn’t Pay Enough Fund 47 00 National Guard Relief Fund 48 00 Neighbors Helping Neighbors ..................... 49 00 Special Olympics ........... 50 00 Veterans’ Donations Fund 51 00 Political Gift .................. 52 00 OR FISCAL YEAR BEGINNING M M D D Y Y Y Y AND ENDING M M D D Y Y Y Y . 66 ARIZONA FORM Resident Personal Income Tax Return 140 Your First Name and Initial Last Name Your Social Security No. 1 Spouse’s First Name and Initial (if box 4 or 6 checked) Last Name Spouse’s Social Security No. 1 Current Home Address - number and street, rural route Apt. No. Daytime Phone (with area code) Home Phone (with area code) 2 94 City, Town or Post Offi ce State Zip Code 8 Age 65 or over (you and/or spouse) 9 Blind (you and/or spouse) 10 Dependents. From page 2, line A2 – do not include self or spouse. 11 Qualifying parents and ancestors of your parents. From page 2, line A5. 12 Federal adjusted gross income (from your federal return) ......................................................................................................... 12 00 13 Additions to income (from page 2, line B12) ............................................................................................................................. 13 00 14 Add lines 12 and 13 ............................................................................................................................................................. 14 00 15 Subtractions from income (from page 2, line C17 or line C30): If applicable, enter the number from line C26a .... 151 15 00 16 Arizona adjusted gross income: Subtract line 15 from line 14 .................................................................................................. 16 00 17 Deductions: Check box and enter amount. See instructions, page 15 ................ 17I ITEMIZED 17S STANDARD 17 00 18 Personal exemptions. See page 15 of the instructions .............................................................................................................. 18 00 19 Arizona taxable income: Subtract lines 17 and 18 from line 16. If less than zero, enter zero ......................................................... 19 00 20 Compute the tax using amount on line 19 and Tax Table X, Y or Optional Tax Tables ......................................................... 20 00 21 Tax from recapture of credits from Arizona Form 301, Part II, line 31 .................................................................................. 21 00 22 Subtotal of tax: Add lines 20 and 21 ....................................................................................................................................... 22 00 23 - 24 Clean Elections Fund Tax Reduction: See instructions, page 16 ............................. 231 YOURSELF 232 SPOUSE 24 00 25 Reduced tax: Subtract line 24 from line 22 ............................................................................................................................... 25 00 26 Family income tax credit from worksheet on page 17 of instructions ................................................................................... 26 00 27 Credits from Arizona Form 301, Part II, line 59, or Forms 310, 321, 322, and 323 if Form 301 is not required ................... 27 00 28 Credit type: Enter form number of each credit claimed ................ 28 3 3 3 3 29 Clean Elections Fund Tax Credit. From worksheet on page 19 of the instructions ....................................................................... 29 00 30 Balance of tax: Subtract lines 26, 27 and 29 from line 25. If the sum of lines 26, 27 and 29 is more than line 25, enter zero .............. 30 00 31 Arizona income tax withheld during 2010 ............................................................................................................................. 31 00 32 Arizona estimated tax payments for 2010 ............................................................................................................................ 32 00 33 2010 Arizona extension payment (Form 204) ....................................................................................................................... 33 00 34 Increased Excise Tax Credit from worksheet on page 19 of the instructions ....................................................................... 34 00 35 Property Tax Credit from Form 140PTC ............................................................................................................................... 35 00 36 Other refundable credits: Check the box(es) and enter the amount(s) ...................... 361 Form 308-I 362 Form 342 36 00 37 Total payments/refundable credits: Add lines 31 through 36 ............................................................................................... 37 00 38 TAX DUE: If line 30 is larger than line 37, subtract line 37 from line 30 and enter amount of tax due. Skip lines 39, 40 and 41 .............. 38 00 39 OVERPAYMENT: If line 37 is larger than line 30, subtract line 30 from line 37 and enter amount of overpayment .............................. 39 00 40 Amount of line 39 to be applied to 2011 estimated tax ......................................................................................................... 40 00 41 Balance of overpayment: Subtract line 40 from line 39 ............................................................................................................. 41 00 42 - 52 Voluntary Gifts to ........................... 53 Check only one if making a political gift ................ 531 Democratic 532 Green 533 Libertarian 534 Republican 54 Estimated payment penalty and MSA withdrawal penalty .................................................................................................... 54 00 55 Check applicable boxes ..... 551 Annualized/Other 552 Farmer or Fisherman 553 Form 221 attached 554 MSA Penalty 56 Total of lines 42 through 52 and 54 ...................................................................................................................................... 56 00 57 REFUND: Subtract line 56 from line 41. If less than zero, enter amount owed on line 58 ................................................................ 57 00 58 AMOUNT OWED: Add lines 38 and 56. Make check payable to Arizona Department of Revenue; include SSN on payment. 58 00 Payment enclosed. Check the box and attach your payment to the upper left corner of this page. 3 Attach required documents in upper left corner after page 2 of the return. Include any payment, federal and Arizona Schedules A. Exemptions Filing Status Enter the number claimed. Do not put a check mark. FOR CALENDAR YEAR 2010 ADOR 10413 (10) Previous ADOR 91-0011 82F Check box 82F if filing under extension You must enter your SSN(s). 4 Married fi ling joint return 5 Head of household .......................... NAME OF QUALIFYING CHILD OR DEPENDENT 6 Married fi ling separate return. Enter spouse’s name and Social Security No. above. 7 Single 5 ADOR 10413 (10) [Previous ADOR 91-0011] AZ Form 140 (2010) Page 2 of 2 Your Name (as shown on page 1) Your Social Security No. PART A: Dependents and Qualifying Parents - do not list yourself or spouse If completing Part A, also complete Part C, lines C15 and/or C16 and C17. A1 List children and other dependents. If more space is needed, attach a separate sheet. NO. OF MONTHS LIVED FIRST AND LAST NAME SOCIAL SECURITY NO. RELATIONSHIP IN YOUR HOME IN 2010 A2 Enter total number of persons listed in A1 here and on the front of this form, box 10; also complete Part C below. .... TOTAL A2 A3 a Enter the names of the dependents listed above who do not qualify as your dependent on your federal return: b Enter dependents listed above who were not claimed on your federal return due to education credits: A4 List qualifying parents and ancestors of your parents. If more space is needed, attach a separate sheet. You cannot list the same person here and also on line A1. For information on who is a qualifying parent or ancestor of your parents, see page 6 of the instructions. NO. OF MONTHS LIVED FIRST AND LAST NAME SOCIAL SECURITY NO. RELATIONSHIP IN YOUR HOME IN 2010 A5 Enter total number of persons listed in A4 here and on the front of this form, box 11 ................................................ TOTAL A5 PART B: Additions to Income B6 Non-Arizona municipal interest .......................................................................................................................................... B6 00 B7 Ordinary income portion of lump-sum distributions excluded on your federal return .......................................................... B7 00 B8 Total federal depreciation. Also see the instructions for line C22 .............................................................................................. B8 00 B9 Medical savings account (MSA) distributions. See page 7 of the instructions ......................................................................... B9 00 B10 I.R.C. §179 expense in excess of allowable amount. Also see the instructions for line C29 .................................................... B10 00 B11 Other additions to income. See instructions and attach your own schedule ............................................................................... B11 00 B12 Total. Add lines B6 through B11. Enter here and on the front of this form, line 13 .......................................................................... B12 00 PART C: Subtractions from Income C13 Exemption: Age 65 or over. Multiply the number in box 8, page 1, by $2,100 ......................................... C13 00 C14 Exemption: Blind. Multiply the number in box 9, page 1, by $1,500......................................................... C14 00 C15 Exemption: Dependents. Multiply the number in box 10, page 1, by $2,300 ........................................... C15 00 C16 Exemption: Qualifying parents and ancestors of your parents. Multiply the number in box 11, page 1, by $10,000 ...................................................................................................................... C16 00 C17 Total exemptions: Add lines C13 through C16. If you have no other subtractions from income, skip lines C18 through C30 and enter the amount on line C17 on Form 140, Page 1, line 15 ..................... C17 00 C18 Interest on U.S. obligations such as U.S. savings bonds and treasury bills ........................................................................ C18 00 C19 Exclusion for federal, Arizona state or local government pensions (up to $2,500 per taxpayer) ......................................... C19 00 C20 Arizona state lottery winnings included as income on your federal return (up to $5,000 only) ........................................... C20 00 C21 U.S. Social Security or Railroad Retirement Act benefi ts included as income on your federal return (the taxable amount) ... C21 00 C22 Recalculated Arizona depreciation ..................................................................................................................................... C22 00 C23 Certain wages of American Indians .................................................................................................................................... C23 00 C24 Income tax refund from other states. See instructions .......................................................................................................... C24 00 C25 Deposits and employer contributions into MSAs. See page 11 of the instructions ................................................................... C25 00 C26 Construction of an energy effi cient residence. See page 12 of the instructions. Enter the number then amount .... C26a C26 00 C27 Pay received for active service as a member of the reserves, national guard or the U.S. armed forces ............................ C27 00 C28 Net operating loss adjustment. See instructions before you enter any amount here ................................................................... C28 00 C29 Other subtractions from income. See instructions and attach your own schedule ...................................................................... C29 00 C30 Total: Add lines C17 through C29. Enter here and on the front of this form, line 15 ................................................... C30 00 Part D: Last Name(s) Used in Prior Years – if different from name(s) used in current year D31 If you are sending a payment with this return, mail to Arizona Department of Revenue, PO Box 52016, Phoenix, AZ, 85072-2016. If you are expecting a refund or owe no tax, or owe tax but are not sending a payment, mail to Arizona Department of Revenue, PO Box 52138, Phoenix, AZ, 85072-2138. PLEASE SIGN HERE I have read this return and any attachments with it. Under penalties of perjury, I declare that to the best of my knowledge and belief, they are true, correct and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. YOUR SIGNATURE DATE OCCUPATION SPOUSE’S SIGNATURE DATE SPOUSE’S OCCUPATION PAID PREPARER’S SIGNATURE DATE FIRM’S NAME (PREPARER’S IF SELF-EMPLOYED) ( ) PAID PREPARER’S TIN PAID PREPARER’S ADDRESS PAID PREPARER’S PHONE NO. 6 Arizona Form 2010 Resident Personal Income Tax Return 140 Special Notice for 2009 Returns Arizona did not fully conform to federal tax law changes for 2009. This means that you may have to file an amended return for 2009. Look at items 1 through 5 below. See if any of those items apply to you. If any of those items apply to you, this will affect your 2009 return. If you have already filed your 2009 return, you must file an amended return to properly report those items. If you were a full year resident during 2009 and you filed Form 140, 140A or 140EZ, you may use Form 140X-NC to correct your 2009 return. If you file Form 140X-NC and pay the entire tax due by October 17, 2011, we will not charge you any penalty or interest on that tax. The following is the list of items that affect your 2009 return. 1. You received unemployment income during 2009. You excluded up to $2,400 of that income on your 2009 federal return. 2. You claimed an itemized deduction for both the sales tax on a new motor vehicle and state income taxes on your 2009 federal return. 3. You made a cash gift during 2010 to aid Haiti earthquake victims. You claimed an itemized deduction for that gift on your 2009 federal return. 4. You elected to exclude discharge of indebtedness (DOI) income from the reacquisition of a business debt instrument on your 2009 federal return. 5. You excluded original issue discount (OID) on a debt instrument described in number 4 above from income on your 2009 federal return. If any of items 1 through 5 above apply to you, you must correct your 2009 Arizona return. To get Form 140X-NC or for more news on this topic, visit our web site at www.azdor.gov. Leave the Paper Behind - e-File! Quick Refunds Accurate Proof of Acceptance Free ** No more paper, math errors, or mailing delays when you e-File! Refunds in as little as 7 to 10 days with direct deposit option. e-File today, pay by April 18, 2011, to avoid penalties and interest. e-File through an Authorized IRS/DOR e-file provider or by using your Personal Computer and the Internet. Visit our web site at www.azdor.gov for a listing of approved e-file providers and on-line filing sources. ** For free e-file requirements, check out our web site at www.azdor.gov. Who Must Use Form 140? You (and your spouse if married filing a joint return) may file Form 140 only if you are full year residents of Arizona. You must use Form 140 rather than Form 140A or Form 140EZ to file for 2010 if any of the following apply to you. Your Arizona taxable income is $50,000 or more, regardless of filing status. You are making adjustments to income. You itemize deductions. You claim tax credits other than the family income tax credit, the credit for increased excise taxes, the property tax credit, or the Clean Elections Fund tax credit. You are claiming estimated payments. Do You Have to File? Arizona Filing Requirements These rules apply to all Arizona taxpayers. You must file if you are: and your Arizona adjusted gross income is at least: or your gross income is at least: Single $ 5,500 $15,000 Married filing jointly $11,000 $15,000 Married filing separately $ 5,500 $15,000 Head of household $ 5,500 $15,000 If you are an Arizona resident, you must report income from all sources. This includes out-of-state income. To see if you have to file, figure your gross income the same as you would figure your gross income for federal income tax purposes. Then, you should exclude income Arizona law does not tax. Income Arizona law does not tax includes: Interest from U.S. Government obligations Social security retirement benefits received under Title II of the Social Security Act Benefits received under the Railroad Retirement Act Active duty military pay Pay received for active service as a reservist or a National Guard member You can find your Arizona adjusted gross income on line 16 of Arizona Form 140. NOTE: Even if you do not have to file, you must still file a return to get a refund of any Arizona income tax withheld. Do You Have to File if You are an American Indian? You must file if you meet the Arizona filing requirements unless all the following apply to you. You are an enrolled member of an Indian tribe. You live on the reservation established for that tribe. You earned all of your income on that reservation. The department has issued a ruling on the Arizona tax treatment of American Indians. This ruling is ITR 96-4. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Do You Have to File if You are the Spouse of an American Indian and You are Not an Enrolled Indian? You must file if you meet the Arizona filing requirements. The department has issued a ruling on the tax treatment of 7 Form 140 2 spouses of American Indians. This ruling is ITR 96-4. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Do You Have to File if You are in the Military? You must file if you meet the Arizona filing requirements unless all the following apply to you. You are an active duty member of the United States armed forces. Your only income for the taxable year is pay received for active duty military service. There was no Arizona tax withheld from your active duty military pay. If Arizona tax was withheld from your active duty military pay, you must file an Arizona income tax return to claim any refund you may be due from that withholding. You must also file an Arizona income tax return if you have any other income besides pay received for active duty military service. If you are an Arizona resident and you have to file an Arizona return, you should file using Form 140. If you were an Arizona resident when you entered the service, you remain an Arizona resident, no matter where stationed, until you establish a new domicile. As an Arizona resident, you must report all of your income, no matter where stationed. You must include your military pay, but using Form 140, you may subtract all pay received for active duty military service, to the extent it is included in your federal adjusted gross income. If you are not an Arizona resident, but stationed in Arizona, the following applies to you. You are not subject to Arizona income tax on your military pay. You must report any other income you earn in Arizona. Use Form 140NR, Nonresident Personal Income Tax Return, to report this income. To find out more, see Arizona Department of Revenue brochure, Pub 704, Taxpayers in the Military. If You Included Your Child's Unearned Income on Your Federal Return, Does Your Child have to File an Arizona Return? No. In this case, the child should not file an Arizona return. The parent must include that same income in his or her Arizona taxable income. Residency Status If you are not sure if you are an Arizona resident for state income tax purposes, we may be able to help. The department has issued a procedure on determining residency status. This procedure is ITP 92-1. To see this procedure, visit our web site at www.azdor.gov and click on legal research and then click on procedures. Residents You are a resident of Arizona if your domicile is in Arizona. Domicile is the place where you have your permanent home. It is where you intend to return if you are living or working temporarily in another state or country. If you leave Arizona for a temporary period, you are still an Arizona resident while gone. A resident is subject to tax on all income no matter where the resident earns the income. Part-Year Residents If you are a part-year resident, you must file Form 140PY, Part-Year Resident Personal Income Tax Return. You are a part-year resident if you did either of the following during 2010. You moved into Arizona with the intent of becoming a resident. You moved out of Arizona with the intent of giving up your Arizona residency. Nonresidents If you are a nonresident, you must file Form 140NR, Nonresident Personal Income Tax Return. What if a Taxpayer Died? If a taxpayer died before filing a return for 2010, the taxpayer's spouse or personal representative may have to file and sign a return for that taxpayer. If the deceased taxpayer did not have to file a return but had tax withheld, a return must be filed to get a refund. The person who files the return should use the form the taxpayer would have used. If the department mailed the taxpayer a booklet, do not use the label. The person who files the return should print the word "deceased" after the decedent's name in the address section of the form. Also enter the date of death after the decedent's name. If your spouse died in 2010 and you did not remarry in 2010, or if your spouse died in 2011 before filing a return for 2010, you may file a joint return. If your spouse died in 2010, the joint return should show your spouse's 2010 income before death, and your income for all of 2010. If your spouse died in 2011, before filing the 2010 return, the joint return should show all of your income and all of your spouse's income for 2010. Print "Filing as surviving spouse" in the area where you sign the return. If someone else is the personal representative, he or she must also sign the return. Are Any Other Returns Required? You may also have to file a fiduciary income tax return. For details about filing a fiduciary income tax return, call the department at (602) 255-3381. Claiming a Refund for a Deceased Taxpayer If you are claiming a refund, you must complete Form 131, Claim for Refund on Behalf of Deceased Taxpayer. Attach this form to the front of the return. Find an Authorized E-File Provider An authorized E-File provider can take the guesswork out of filing taxes. To Find an Authorized e-File Provider near you log on www.azdor.gov 8 Form 140 3 What are the Filing Dates and Penalties? When Should You File? You have extra time to file and pay for 2010 because April 15, 2011 is a legal holiday in Washington DC. This means that your 2010 calendar year tax return is due no later than midnight, April 18, 2011. File your return as soon as you can after January 1, but no later than April 18, 2011. If you are a fiscal year filer, your return is due on the 15th day of the fourth month following the close of your fiscal year. What if You Cannot File on Time? You may request an extension if you know you will not be able to file on time. NOTE: An extension does not extend the time to pay your income tax. For details, see the instructions for Arizona Form 204. To get a filing extension, you can either: 1. Apply for a state extension (Form 204). To apply for a state extension, file Arizona Form 204 by April 18. See Form 204 for details. You do not have to attach a copy of the extension to your return when you file, but make sure that you check box 82F on page 1 of the return. If you must make a payment, use Arizona Form 204, or visit www.aztaxes.gov to make an electronic payment. 2. Use your federal extension (federal Form 4868). File your Arizona return by the same due date. You do not have to attach a copy of your federal extension to your return, but make sure that you check box 82F on page 1 of the return. When Should You File if You are a Nonresident Alien? The due date for your Arizona return is not the same as the due date for your federal return. Your Arizona return is due by April 18 even though your federal return is due on June 15. If you want to file your Arizona return after April 18, you must ask for a filing extension. You must file this request by April 18. Arizona will allow up to a 6-month extension. This will allow you to file your return by October 17, 2011. See Form 204 for extension filing details. If you have a federal 6-month extension, you can file your Arizona return under that extension. If you file using your federal extension, Arizona will also allow you an extra 6 months. Because we will allow only 6 months, the due date for your Arizona return is not the same as the due date for your federal return. In this case, your Arizona return will be due by October 17 even though your federal return will not be due until December 15. If you file your 2010 Arizona calendar return after October 17, 2011, your return will be late. If you are a fiscal year filer, your return is due on the 15th day of the fourth month following the close of your fiscal year. What if You File or Pay Late? If you file or pay late, we will charge you interest and penalties on the amount you owe. If the U.S. Post Office postmarks your 2010 calendar year return by April 18, 2011, your return will not be late. You may also use certain private delivery services designated by the IRS to meet the “timely mailing as timely filed” rule. Late Filing Penalty If you file late, we will charge you a late filing penalty. This penalty is 4½% of the tax required to be shown on the return for each month or fraction of a month the return is late. This penalty cannot exceed 25% of the tax found to be remaining due. Late Payment Penalty If you pay your tax late, we will charge you a late payment penalty. This penalty is ½ of 1% (.005) of the amount shown as tax for each month or fraction of a month for which the failure continues. We charge this penalty from the original due date of the return until the date you pay the tax. This penalty cannot exceed a total of 10%. Extension Underpayment Penalty If you file your return under an extension, you must pay 90% of the tax shown on your return by the return's original due date. If you do not pay this amount, we will charge you a penalty. This penalty is ½ of 1% (.005) of the tax not paid for each 30 day period or fraction of a 30 day period. We charge this penalty from the original due date of the return until the date you pay the tax. This penalty cannot exceed 25% of the unpaid tax. If we charge you the extension underpayment penalty, we will not charge you the late payment penalty under Arizona Revised Statutes section 42-1125.D. NOTE: If you are subject to two or more of the above penalties, the total cannot exceed 25%. Interest We charge interest on any tax not paid by the due date. We will charge you interest even if you have an extension. If you have an extension, we will charge you interest from the original due date until the date you pay the tax. The Arizona interest rate is the same as the federal rate. When Should You Amend a Return? If you need to make changes to your return once you have filed, you should file Form 140X, Individual Amended Return. You should file your amended return after your original return has processed. Do not file a new return for the year you are correcting. Generally, you have four years to amend a return to claim a refund. If you amend your federal return for any year, you must also file an Arizona Form 140X for that year. You must file the Form 140X within 90 days of the final determination of the IRS. If the IRS makes a change to your federal taxable income for any year, you must report that change to Arizona. You may use one of the following two options to report this change. Option 1 You may file a Form 140X for that year. If you choose this option, you must amend your Arizona return within 90 days of the final determination of the IRS. Attach a complete copy of the federal notice to your Form 140X. Option 2 You may file a copy of the final federal notice with the department within 90 days of the final determination of the IRS. If you choose this option, you must include a statement in which you must: 1. Request that the department recompute your tax; and 2. Indicate if you agree or disagree with the federal notice. If you do not agree with the federal notice, you must also include any documents that show why you do not agree. If you choose option 2, mail the federal notice and any other documents to: 9 Form 140 4 Arizona Department of Revenue 1600 W. Monroe, Attention: Individual Income Audit Phoenix, AZ 85007-2650 Do You Need to Make Estimated Payments in 2011? You must make Arizona estimated income tax payments during 2011 if: Your filing status is: AND Your Arizona gross income for 2010 was greater than: AND Your Arizona gross income for 2011 is greater than: Married Filing Joint $150,000 $150,000 Single $75,000 $75,000 Head of Household $75,000 $75,000 Married Filing Separately $75,000 $75,000 If you met the income threshold for 2010, you must make estimated payments during 2011 unless you are sure you will not meet the threshold for 2011. As a full year resident, your Arizona gross income is your federal adjusted gross income. This amount is on line 12 of the 2010 Form 140. See the worksheet for Form 140ES to figure how much your payments should be. What if You Make Your Estimated Payments Late? We will charge you a penalty if you fail to make any required payments. We will charge you a penalty if you make any of your required payments late. For details, see Arizona Form 221. Can You Make Estimated Payments Even if You Do Not Have To? If you do not have to make Arizona estimated income tax payments, you may still choose to make them. For details, see Arizona Form 140ES. Line-by-Line Instructions Tips for Preparing Your Return: Make sure that you write your SSN on your return. Complete your return using black ink. You must round dollar amounts to the nearest whole dollar. If 50 cents or more, round up to the next dollar. If less than 50 cents, round down. Do not enter cents. When asked to provide your own schedule, attach a separate sheet with your name and SSN at the top. Attach your own schedules to your return. Attach these schedules behind page 2 of your return and behind your Schedules A if itemizing. You must complete your federal return before you can start your Arizona return. Make sure you include your home telephone number. If your daytime number is not the same as your home number, make sure you include a daytime telephone number. If filing a fiscal year return, fill in the period covered in the space provided at the top of the form. Entering Your Name, Address, and SSN Lines 1, 2, and 3 - NOTE: Make sure that you write your SSN on the appropriate line. If your booklet has a peel-off label, use that label if all the information is correct. If any of the information on the label is incorrect, do not use the label. Attach the label after you finish your return. If you do not have a peel-off label, print or type your name, address, and SSN in the space provided. If you are filing a joint return, enter your SSNs in the same order as your names. If your name appears first on the return, make sure your SSN is the first number listed. If you are married filing separately, enter your name and SSN on the first line 1. Then enter your spouse’s name and SSN on second line 1. If you are a nonresident of the United States or a resident alien who does not have an SSN use the identification number (ITIN) the IRS issued to you. For a deceased taxpayer, see page 2 of these instructions. Use your current home address. The department will send your refund to or correspond with you at that address. NOTE: Make sure your SSN is correct. If you are filing a joint return, also make sure you list your SSNs in the same order every year. Make sure that you enter your SSN on your return. Make sure that all SSNs are clear and correct. You may be subject to a penalty if you fail to include your SSN. It will take longer to process your return if SSNs are missing, incorrect, or unclear. ID Numbers for Paid Preparers If you pay someone else to prepare your return, that person must also include an ID number where requested. A paid preparer may use any of the following. his or her SSN his or her PTIN the EIN for the business A paid preparer who fails to include the proper numbers may also be subject to a penalty. DO YOU HAVE A COMPLICATED RETURN? E-File makes filing a complex return simple! E-File Software Offers: Easy step-by-step instructions Error detection before filing Easy form selection Maximum deductions For a list of approved software visit our website at www.azdor.gov 10 Form 140 5 Determining Your Filing Status The filing status that you use on your Arizona return may be different from that used on your federal return. Use this section to determine your filing status. Check the correct box (4 through 7) on the front of Form 140. Line 4 Box - Married Filing a Joint Return If you are married and filing a joint return, check box 4. You may file a joint return if you were married as of December 31, 2010. It does not matter whether or not you were living with your spouse. You may file a joint return, even if you and your spouse filed separate federal returns. You may file a joint return if your spouse died during 2010 and you did not remarry in 2010. See page 2 of these instructions for details. The Arizona Form 140 is for full year residents only. You may not file a joint Arizona income tax return on Form 140 if any of the following apply. 1. Your spouse is a nonresident alien (citizen of and living in another country). 2. Your spouse is a resident of another state. 3. Your spouse is a part-year Arizona resident. If filing a joint return with your nonresident spouse, you may file a joint return using Form 140NR. See Form 140NR instructions. If filing a joint return with your part-year resident spouse, you may file a joint return using Form 140PY. See Form 140PY instructions. The department has issued a ruling on filing a joint return with your part-year resident or nonresident spouse. This ruling is ITR 95-2. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Line 5 Box - Head of Household If you are filing as a head of household, check box 5. You may file as head of household on your Arizona return, only if one of the following applies. You qualify to file as head of household on your federal return. You qualify to file as a qualifying widow or widower on your federal return. Line 6 Box - Married Filing Separately If you are filing a separate return, check box 6 and enter your spouse's name and SSN on the second line 1. If you were married as of December 31, 2010, you may choose to file a separate return. You may file a separate return, even if you and your spouse filed a joint federal return. Arizona is a community property state. If you file a separate return, you must figure how much income to report using community property laws. Under these laws, a separate return must reflect one-half of the community income from all sources plus any separate income. When you file separate returns, you must account for community deductions and credits on the same basis as community income. Both you and your spouse must either itemize or not itemize. If one of you itemizes, you both must itemize. If one of you takes a standard deduction, you both must take a standard deduction. One of you may not claim a standard deduction while the other itemizes. If you and your spouse support a dependent child from community income, either you or your spouse may claim the dependent. Both of you cannot claim the same dependent on both returns. The department has issued tax rulings on filing a separate return. These rulings are ITR 93-18 and ITR 93-19. To see these rulings, visit our web site at www.azdor.gov and click on legal research and then click on rulings. NOTE: In some cases you may treat community income as separate income. The department has issued a ruling on when you may treat community income as separate income. This ruling is ITR 93-22. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. If one spouse is a resident and the other spouse is not, other special rules may apply when filing a separate return. The department has issued a ruling on how to report income in this case. This ruling is ITR 93-20. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Line 7 Box - Single If you are filing as single, check box 7. Use this filing status if you were single on December 31, 2010. You are single if any of the following apply to you. You have never been married. You are legally separated under a decree of divorce or of separate maintenance. You were widowed before January 1, 2010, and you did not remarry in 2010, and you do not qualify to file as a qualifying widow or widower with dependent children on your federal return. Exemptions Write the number of exemptions you are claiming in boxes 8, 9, 10, and 11. Do not put a checkmark. You may lose the exemption if you put a checkmark in these boxes. You may lose the dependent exemption if you do not complete Part A, lines A1 through A3 on page 2. You may lose the exemption for qualifying parents or ancestors if you do not complete Part A, lines A4 and A5, on page 2. Line 8 Box - Age 65 and Over Write "1" in box 8 if you or your spouse were 65 or older in 2010. Write "2" in box 8 if both you and your spouse were 65 or older in 2010. Line 9 Box - Blind Write "1" in box 9 if you or your spouse are totally or partially blind. Write "2" in box 9 if both you and your spouse are totally or partially blind. If you or your spouse were partially blind as of December 31, 2010, you must get a statement certified by your eye doctor or registered optometrist that: 1. You cannot see better than 20/200 in your better eye with glasses or contact lenses or 2. Your field of vision is 20 degrees or less. If your eye condition is not likely to improve beyond the conditions listed above, you can get a statement certified by your eye doctor or registered optometrist to that effect instead. You must keep the statement for your records. 11 Form 140 6 Line 10 Box - Dependents You must complete Part A, lines A1 through A3b, on page 2 of your return before you can total your dependent exemptions. You may claim only the following as a dependent. A person that qualifies as your dependent on your federal return. NOTE: If you do not claim a dependent exemption for a student on your federal return in order to allow the student to claim a federal education credit on the student’s federal return, you may still claim the exemption on your Arizona return. For more information, see Arizona Individual Income Tax Ruling ITR 05-02. A person who is age 65 or over (related to you or not) that does not qualify as your dependent on your federal return, but one of the following applies. 1. In 2010, you paid more than one-fourth of the cost of keeping this person in an Arizona nursing care institution, an Arizona residential care institution, or an Arizona assisted living facility. Your cost must be more than $800. 2. In 2010, you paid more than $800 for either Arizona home health care or other medical costs for the person. A stillborn child if the following apply: 1. The stillbirth occurred during 2010. 2. You received a certificate of birth resulting in stillbirth from the Arizona Department of Health Services. 3. The child would have otherwise been a member of your household. Completing Line(s) A1 NOTE: If a person who qualifies as your dependent is also a qualifying parent or ancestor of your parent, you may claim that person as a dependent on line A2, or you may claim that person as a qualifying parent or ancestor of your parent on line A5. You may not claim that same person on both line A2 and line A5. Do not list the same person on line A1 that you listed on line A4. Enter the following on line(s) A1. 1. The dependent's name. If you are claiming an exemption for a stillborn child and the child was not named, enter “stillborn child” in place of a name. 2. The dependent's SSN. If you are claiming an exemption for a stillborn child enter the certificate number from the certificate of birth resulting in stillbirth. 3. The dependent's relationship to you. 4. The number of months the dependent lived in your home during 2010. If you are claiming an exemption for a stillborn child, enter the date of birth resulting in the stillbirth. You may lose the exemption if you do not furnish this information. Line A2 - Total Dependents Enter the total number of persons listed on line(s) A1. Enter the same number on the front of the return in box 10. Lines A3a and A3b - Persons You Did Not Take as Dependents on Your Federal Return On line A3a, enter the following. 1. The names of any dependents age 65 or over listed on line(s) A1 that you cannot take as a dependent on your federal return. 2. The name of any stillborn child listed on line(s) A1, if the stillborn child was named. If the stillborn child was not named, enter “stillborn child” on line A3a. Also enter the date of birth resulting in the stillbirth. On line A3b, enter the name of any student listed on line(s) A1 that you did not claim as an exemption on your federal return in order to allow that student to claim a federal education credit on the student’s federal return. Line 11 Box - Qualifying Parents and Ancestors of Your Parents A qualifying parent or ancestor of your parent may be any one of the following. Your parent or your parent’s ancestor. Your parent’s ancestor is your grand parent, great grand parent, great great grand parent, etc. If married filing a joint return, your spouse’s parent or an ancestor of your spouse’s parent. You may claim this exemption if all of the following apply. 1. The parent or ancestor of your parent lived in your principal residence for the entire taxable year. 2. You paid more than one-half of the support and maintenance costs of the parent or ancestor of your parent during the taxable year. 3. The parent or ancestor of your parent was 65 years old or older during 2010. 4. The parent or ancestor of your parent required assistance with activities of daily living, like getting in and out of bed or chairs, walking around, going outdoors, using the toilet, bathing, shaving, brushing teeth, combing hair, dressing, medicating or feeding. You must complete Part A, lines A4 and A5, on page 2 of your return before you can total your exemptions for qualifying parents and ancestors of your parents. NOTE: If a person who is a qualifying parent or ancestor of your parent also qualifies as your dependent, you may claim that person as a dependent on line A2, or you may claim that person as a qualifying parent or ancestor of your parent on line A5. You may not claim that same person on both line A2 and line A5. Do not list the same person on line A4 that you listed on line A1. FOR PEACE OF MIND…E-FILE Ask your tax professional for E-File or Do-it-yourself using the Internet www.azdor.gov 12 Form 140 7 Completing Line(s) A4 Enter the following on line(s) A4. 1. The name of the qualifying parent or ancestor of your parent. 2. The SSN of the qualifying parent or ancestor of your parent. 3. The qualifying parent’s or ancestor’s relationship to you, or your spouse if filing a joint return. 4. The number of months the qualifying parent or ancestor of your parent lived in your home during 2010. You may lose the exemption if you do not furnish this information. Line A5 - Total Qualifying Parents or Ancestors of Your Parents Enter the total number of persons listed on line(s) A4. Enter the same number on the front of the return in box 11. Additions to Income Line B6 - Non-Arizona Municipal Interest Enter the amount of interest income from non-Arizona municipal bonds that you did not include as income on your federal return. You may exclude any expenses incurred to purchase or carry the obligation. Reduce the interest income by the amount of those expenses that you could not deduct on your federal return. If you received tax exempt interest from municipal bonds, attach a schedule listing the payors and the amount received from each payor. You may also want to attach supporting documents for amounts received from Arizona municipal bonds that are exempt from Arizona income tax. These may be items such as bank statements, brokerage statements, etc. Line B7 - Ordinary Income Portion of Lump-Sum Distributions Excluded on Your Federal Return Use line B7 if you use federal averaging for lump-sum distributions from your pension or profit-sharing plan. Arizona law does not provide for averaging. Enter the amount of the distribution that you treated as ordinary income on your federal return. If you choose to treat the capital gain portion of the distribution as ordinary income, you must also include that amount. For details, see Arizona Department of Revenue Income Tax Ruling ITR 93-5. Line B8 - Total Federal Depreciation Enter the total amount of depreciation deducted on the federal return. If you make an entry here, you should also take a subtraction on line C22. To figure how much you should subtract, see the instructions for line C22. Line B9 - Medical Savings Account (MSA) Distributions For information on Arizona's MSA provisions, see the department's MSA brochure, Pub 542. You must add amounts received from an MSA here if any of the following apply. 1 - You Withdrew Funds from Your MSA for Other Than Qualified Expenses You must make an entry here if all of the following apply. 1. You withdrew money from your MSA during 2010. 2. You did not use the amount withdrawn to pay qualified medical expenses. 3. You did not have to include the withdrawal as income on your federal income tax return. Enter the amount withdrawn. 2 - Deceased Account Holder Where the Named Beneficiary is Not the Decedent's Surviving Spouse You must make an entry here if all of the following apply. 1. The account holder died during the year. 2. You are the named beneficiary of the decedent's MSA. 3. You are not the decedent's surviving spouse. 4. You did not have to include the value of the MSA as income on your federal income tax return. In this case, the MSA ceased to be an MSA. Enter the fair market value of the MSA as of the date of death, less the amount of MSA funds used within one year of the date of death, to pay the decedent's qualified medical expenses. You can reduce the fair market value by only those expenses paid from the MSA. If you pay additional medical expenses for the decedent from the MSA after you file, you may file an amended return to further reduce the fair market value of the MSA. 3 - Decedent's Final Return and No Named MSA Beneficiary Make an entry here if all of the following apply. 1. The account holder died during the year. 2. There is no named MSA beneficiary. 3. This is the decedent's final return. 4. The value of the MSA did not have to be included on the decedent's final federal income tax return. In this case, the MSA ceases to be an MSA. Enter the fair market value of the MSA as of the date of death. This rule applies in all cases in which there is no named beneficiary, even if the surviving spouse ultimately obtains the right to the MSA assets. NOTE: The following are not withdrawals. Do not enter any of the following: Amounts from the MSA used to pay qualified medical expenses. A qualified return of excess contributions. A qualified rollover. The fair market value of an MSA received by a surviving spouse who was the deceased account holder's named beneficiary. For more information about the above items, see the department's MSA brochure, Pub 542. Line B10 - I.R.C. § 179 Expense in Excess of Allowable Amount Enter the amount of IRC § 179 expense deducted on the federal return that exceeds $25,000. If you make an entry here, you should also take a subtraction on line C29 for a portion of the amount entered here. To figure how much you should subtract, see the instructions for line C29. Line B11 - Other Additions to Income Use line B11 if any of the special circumstances below apply. 13 Form 140 8 Attach your own schedule to the back of your return explaining any amounts entered here. You may either add or subtract items A through D below (line B11 or C29, respectively) depending on your situation. A. Pension Adjustments Use this adjustment if both of the following apply. 1. Arizona taxed your pension for years before 1979. 2. You reported that pension on your federal return using the percentage exclusion method. Do not use this adjustment if either of the following apply. 1. You reported your pension income as fully taxable on your federal return. 2. You reported your pension income on your federal return under the "three-year-rule". Pension Adjustment Worksheet - Line B11 Follow these steps to figure the adjustment. (Keep this worksheet for your records.) 1. Your contribution to annuity. 1. 2. Pension amount received in prior years. 2. 3. Remainder of cost (line 1 minus line 2 but not less than zero). 3. 4. Pension amount received this year. 4. 5. Subtract line 3 from line 4 (but not less than zero). 5. 6. Enter the pension amount taxable on your federal return. 6. 7. Subtract line 6 from line 5. 7. If line 7 is more than zero, enter the amount on line 7 as an addition to income. Enter the addition on line B11. If line 6 is more than line 5, enter the difference as a subtraction from income. Enter the subtraction on line C29. B. Married Persons Filing Separate Returns If you file a separate Arizona return, you must report the following income on that return. one-half of the community income from all sources. all of your separate income. If you and your spouse file a joint federal return but separate Arizona returns, you must make sure that each separate return reflects the correct income. If you begin your Arizona return with only the income that you earned during the year, you will have to adjust this income. If you file separate federal returns, each of your federal returns should already reflect the correct income. Since your separate Arizona returns will begin with the federal adjusted gross income, you will not have to adjust your income. If you have to adjust your income, attach a schedule showing how you figured your adjustment. C. Partnership Income Use this adjustment if your Arizona Form 165, Schedule K-1, shows a difference between federal and state distributable income. If the difference reported on your Arizona Form 165, Schedule K-1, is a positive number, enter that difference as an addition. Enter the addition on line B11. If the difference reported on your Arizona Form 165, Schedule K-1, is a negative number, enter that difference as a subtraction. Enter the subtraction on line C29. D. Fiduciary Adjustment A fiduciary uses Form 141AZ, Schedule K-1, to report to you your share of the fiduciary adjustment from the trust or estate. Line 3 of Form 141AZ, Schedule K-1, shows your share of the fiduciary adjustment from the estate or trust. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a positive number, enter that amount as an addition. Enter the addition on line B11. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a negative number, enter that amount as a subtraction. Enter the subtraction on line C29. E. Net Operating Losses Arizona does not have specific provisions for calculating the net operating loss of an individual. Generally, the amount of net operating loss deduction included in your federal adjusted gross income is the amount allowable for Arizona purposes. However, there are instances when the amount allowable for Arizona purposes may be different. You must adjust the amount of net operating loss deduction included in your federal adjusted gross income if you have already deducted any amount of the net operating loss included in your federal adjusted gross income for Arizona purposes. In this case, enter on line B11, the amount of net operating loss included in your federal adjusted gross income which you previously deducted for Arizona purposes. Usually, Arizona conforms to the federal net operating loss provisions, including the carryback provisions. However, Arizona did not conform to the special federal net operating loss rules for 2008 and 2009. Under the special rules for 2008 and 2009, you could have elected to carry the net operating loss back for 3, 4 or 5 years, instead of the normal 2 years. This election would have been allowed under I.R.C. § 172(b)(1)(h) as amended by the American Recovery and Reinvestment Act of 2009 or the Worker, Homeownership, and Business Assistance Act of 2009. If you deducted a federal net operating loss carryback under the federal American Recovery and Reinvestment Act of 2009 or the federal Worker, Homeownership, and Business Assistance Act of 2009, see the instructions for line C28. For information on deducting a net operating loss carryback in cases where you did not make an election under I.R.C. § 172(b)(1)(h), see Arizona Department of Revenue Income Tax Procedure ITP 99-1. F. Items Previously Deducted for Arizona Purposes Arizona statutes prohibit a taxpayer from deducting items more than once. However, under the operation of former Arizona law (1989 and prior), you could deduct certain items in greater amounts for Arizona purposes than for federal purposes. Investment interest and passive activity losses were such items. In some cases, you could have deducted such amounts in their entirety on the Arizona return. For federal purposes, the deduction for these items was limited, with the unused portions being carried forward and deducted in future years. Your Arizona return may include these previously deducted items because of the difference between the federal and former Arizona treatment. If your Arizona taxable income includes items previously deducted for Arizona purposes, you must add such amounts to your Arizona gross income. G. Claim of Right Adjustment for Amounts Repaid in 2010 You must make an entry here if all of the following apply. 1. During 2010, you were required to repay amounts held under a claim of right. 14 Form 140 9 2. The amount required to be repaid during 2010 was more than $3,000. 3. You took a deduction for the amount repaid on your 2010 federal income tax return. If the above apply, enter the amount deducted on your federal income tax return here. For more information on the Arizona claim of right provisions, see Arizona Department of Revenue Individual Income Tax Procedure ITP 95-1. H. Claim of Right Adjustment for Amounts Repaid in Prior Taxable Years You must make an entry here if all of the following apply. 1. During a year prior to 2010 you were required to repay amounts held under a claim of right. 2. You computed your tax for that prior year under Arizona's claim of right provisions. 3. A net operating loss or capital loss was established due to the repayment made in the prior year. 4. You are entitled to take that net operating loss or capital loss carryover into account when computing your 2010 Arizona taxable income. 5. The amount of the loss carryover included in your federal income is more than the amount allowed to be taken into account for Arizona purposes. Enter the amount by which the loss carryover included in your federal adjusted gross income is more than the amount allowed for the taxable year under Arizona law. I. Addition to S Corporation Income Due to Credits Claimed Shareholders of an S corporation who claim a credit passed through from an S corporation must make an addition to income for the amount of expenses disallowed by reason of claiming the credit. An S corporation that passes the following credits through to its shareholders must notify each shareholder of his or her pro rata share of the adjustment. You must enter an amount on this line when claiming any of the following credits. Agricultural water conservation system credit Environmental technology facility credit Pollution control credit Credit for solar hot water heater plumbing stub outs and electric vehicle recharge outlets Credit for employment of TANF recipients Agricultural pollution control equipment credit Motion picture credits J. Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlet Expenses If you take a credit for installing solar hot water heater plumbing stub outs or electric vehicle recharge outlets in a dwelling you constructed (Form 319), you cannot deduct any expenses for which you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return. K. Wage Expense for Employers of TANF Recipients If you take a credit for employing TANF recipients (Form 320), you cannot deduct any wage expense for which you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return. L. Motion Picture Expenses If you take a motion picture credit on Form 334, you cannot deduct any expenses deducted on your federal return related to the production, the infrastructure project or related to a transferred credit. Enter the amount of any such expenses that were deducted in computing federal adjusted gross income for which you claimed a credit. M. Agricultural Water Conservation System Credit If you take this credit (Form 312), you cannot deduct any expenses for which you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return. N. Adjusted Basis in Property for Which You Have Claimed a Credit for Investment in Qualified Small Businesses If you claim a credit for an investment in a qualified small business on Arizona Form 338, you must adjust your basis in the investment by the amount of the credit claimed. You must report this difference in basis on the Arizona return that you file for the taxable year in which you sell or otherwise dispose of the investment. If you sold or otherwise disposed of the investment during the 2010 taxable year, on line B11, enter the amount by which the adjusted basis computed under the internal revenue code with respect to that property exceeds the adjusted basis of the property computed under Arizona Revised Statutes section 43-1074.02. O. Depreciation or Amortization for a Water Conservation System If you claimed a water conservation system credit on Arizona Form 339, you may not deduct any depreciation or amortization for that system on your Arizona return. Enter the amount of depreciation or amortization claimed on your federal return for the water conservation system for which you have claimed a credit. P. Nonqualified Withdrawals from 529 College Savings Plans You must make an addition to income if you received a nonqualified withdrawal from a 529 college savings plan. You must make an addition if the withdrawal was not included in your federal adjusted gross income. The amount that you must add is the amount withdrawn, but no more than the difference between the amount of contributions subtracted in prior years and the amount added in any prior years. A nonqualified withdrawal is a withdrawal other than any of the following: 1. A qualified withdrawal. A qualified withdrawal is a withdrawal from an account to pay the qualified higher education expenses of the designated beneficiary of the account. 2. A withdrawal made as the result of the death or disability of the designated beneficiary of an account. 3. A withdrawal that is made on the account of a scholarship, or the allowance or payment described in section 135(d)(1)(B) or (C) of the internal revenue code, and that is received by the designated beneficiary, but only to the extent of the amount of this scholarship, allowance or payment. 4. A rollover or change of designated beneficiary. Q. 2010 Discharge of Indebtedness (DOI) Income Generally, when a loan is settled for less than the amount owed, DOI income is realized by the debtor and usually must be included in the debtor’s gross income. The amount of 15 Form 140 10 DOI income is generally equal to the amount of loan forgiveness. DOI income also occurs when a debtor repurchases his or her own debt at a discount (a price lower than the adjusted basis issue price of the debt instrument). In debt repurchase transactions, the amount of DOI income is generally equal to the difference between the adjusted issue price and the price paid for the debt instrument. For federal purposes, a taxpayer may have made a special election for taxable years 2009 or 2010 to include DOI income in connection with the reacquisition of a business debt instrument, ratably over a 5 year period. A taxpayer that made this election will generally include this income in federal adjusted gross income beginning with the 2014 taxable year. A taxpayer would have made the federal election under I.R.C. § 108(i) as added by the American Recovery and Reinvestment Act of 2009. Arizona did not adopt the special federal DOI income deferral provisions for the 2009 or 2010 taxable year. For Arizona purposes, if you made the federal election to defer the inclusion of DOI income under I.R.C. § 108(i), you must make an entry here. On line B11, enter the amount of DOI income that you deferred and excluded from the computation of your 2010 federal adjusted gross income under I.R.C. § 108(i). Even though you must include that DOI income on your 2010 Arizona return, Arizona will not tax that income again in the future years when you include the income in your federal adjusted gross income. If you make an entry here, also see the instructions for “Other Subtractions from Income” even though this subtraction will not apply until the year in which you include the income in your federal adjusted gross income. R. Original Issue Discount (OID) on Reacquisition of Debt Instrument For federal purposes, when a taxpayer made the special election to defer DOI income under I.R.C. § 108(i) (see letter “Q” above), the taxpayer was not allowed to take a deduction with respect to the portion of any OID that accrued with respect to that DOI income, during the income deferral period. In this case, the taxpayer had to deduct the aggregate amount of the OID deductions disallowed ratably over a 5 year period, beginning with the period in which the income was includible in federal adjusted gross income. Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the taxpayer federally deferred the DOI income. For Arizona purposes, you had to report the DOI income from a debt reacquisition in the year in which you reacquired the debt, and you were allowed to subtract any OID related to that DOI income in the year the OID accrued. (See the instructions for “Other Subtractions from Income.”) If your federal adjusted gross income includes a deduction for any accrued OID that you have already subtracted for Arizona purposes, you must make an addition to Arizona income for the amount of deferred OID deducted on your federal return. Generally, this addition will not apply until taxable year 2014 through 2018. However, if you were required to accelerate reporting of the DOI income for federal purposes and were allowed to deduct accrued OID attributable to that income on a return filed for a year prior to 2014, this addition may apply to an earlier year. On line B11, enter the amount of any previously deferred OID that you deducted in computing your 2010 federal adjusted gross income, to the extent that the amount was previously subtracted from Arizona gross income. S. Early Withdrawal of Arizona, County, City, or School Retirement System Contributions If you meet all of the following, you must enter an amount here. 1. You left your job with the State of Arizona or an Arizona county, city, or school district for reasons other than retirement. 2. When you left, you took out the contributions you had made to the retirement system while employed. 3. You deducted these contributions on your Arizona income tax returns that you filed for prior years. 4. You did not include these contributions in your federal adjusted gross income this year. If you meet all these tests, you must report as income those contributions previously deducted on your prior years' Arizona tax returns. For details, see Arizona Department of Revenue Income Tax Ruling ITR 93-7. T. Other Adjustments Other special adjustments may be necessary. You may need to make an addition for depreciation or amortization. You may also need to make an addition if you claimed certain tax credits. Call one of the numbers listed on the back cover if any of the following apply. You are a qualified defense contractor that elected to amortize under Arizona Revised Statutes section 43-1024. You sold or disposed of property that was held for the production of income and your basis was computed under the Arizona Income Tax Act of 1954. You claimed the environmental technology facility credit. You claimed the pollution control credit. You claimed the recycling equipment credit. You claimed the agricultural pollution control equipment credit. You elected to amortize the basis of a pollution control device or the cost of a child care facility under Arizona law in effect before 1990. You are still deducting amortization or depreciation for that device or facility on your federal income tax return. Line B12 - Total Additions Add lines B6 through B11. Enter the total on line B12 and on the front of your return on line 13. Subtractions From Income You may only subtract those items for which statutory authority exists. Without such authority you cannot take a subtraction. If you have any questions concerning subtractions from income, call one of the numbers listed on the back cover. NOTE: You may not subtract any amount that is allocable to income excluded from your Arizona taxable income. Line C13 - Exemption: Age 65 or Over Multiply the number in box 8 on the front of your return by $2,100 and enter the result. Line C14 - Exemption: Blind Multiply the number in box 9 on the front of your return by $1,500 and enter the result. Line C15 - Exemption: Dependents Multiply the number in box 10 on the front of your return by $2,300 and enter the result. 16 Form 140 11 Line C16 - Exemption: Qualifying Parents and Ancestors of Your Parents Multiply the number in box 11 on the front of your return by $10,000 and enter the result. Line C17 - Total Add lines C13 through C16 and enter the total. If you have no other subtractions from income, skip lines C18 through C30 and enter this total on Form 140, page 1, line 15. Line C18 - Interest on U.S. Obligations Enter the amount of interest income from U.S. Government obligations included as income on your federal return. U.S. Government obligations include obligations such as savings bonds and treasury bills. You cannot deduct any interest or other related expenses incurred to purchase or carry the obligations. If such expenses are included in your Arizona gross income, you must reduce the subtraction by such expenses. If you are itemizing deductions on your Arizona return, you must exclude such expenses from the amount deducted. NOTE: Do not subtract interest earned on FNMA or GNMA bonds since this interest is taxable by Arizona. For details, see the department's income tax ruling, ITR 06-1. Do not subtract any amount received from a qualified pension plan that invests in U.S. Government obligations. Do not subtract any amount received from an IRA that invests in U.S. Government obligations. These amounts are not interest income. For details, see Arizona Department of Revenue Income Tax Rulings ITR 96-2 and ITR 96-3. Line C19 - Exclusion for U.S. Government, Arizona State or Local Government Pensions If you receive pension income from any of the sources listed below, subtract the amount you received or $2,500, whichever is less. Include only the amount you reported as income on your federal return. If both you and your spouse receive such pension income, each spouse may subtract the amount received or $2,500, whichever is less. Public pensions from the following sources qualify for this subtraction. The United States Government Service Retirement and Disability Fund The United States Foreign Service Retirement and Disability System Retired or retainer pay of the uniformed services of the United States Any other retirement system or plan established by federal law NOTE: This applies only to those retirement plans authorized and enacted into the U.S. Code. This does not apply to a retirement plan that is only regulated by federal law (i.e., plans which must meet certain federal criteria to be qualified plans). The Arizona State Retirement System The Arizona State Retirement Plan The Corrections Officer Retirement Plan The Public Safety Personnel Retirement System The Elected Officials' Retirement Plan A retirement plan established for employees of a county, city, or town in Arizona An optional retirement program established by the Arizona Board of Regents under Arizona Revised Statutes An optional retirement program established by an Arizona community college district. NOTE: Public retirement pensions from states other than Arizona do not qualify for this subtraction. Line C20 - Arizona Lottery Winnings You may subtract up to $5,000 of winnings received in 2010 for Arizona lottery prizes. If you subtract Arizona lottery winnings here, you may have to adjust the amount of gambling losses claimed as an itemized deduction. See instructions for Form 140 Schedule A, Itemized Deduction Adjustments. Line C21 - U.S. Social Security Benefits or Railroad Retirement Benefits Arizona does not tax social security benefits received under Title II of the Social Security Act. Arizona does not tax railroad retirement benefits received from the Railroad Retirement Board under the Railroad Retirement Act. If you included such social security or railroad retirement benefits as income on your federal return, use line C21 to subtract this income. NOTE: Enter only the taxable amount (the amount that was subject to federal tax). Do not include any amount that was not subject to federal income tax. See Arizona Department of Revenue Income Tax Ruling ITR 96-1 for more information about railroad retirement benefits. Line C22 - Recalculated Arizona Depreciation Enter the total amount of depreciation allowable pursuant to IRC § 167(a) for the taxable year calculated as if you had elected not to claim bonus depreciation for eligible properties for federal purposes. Line C23 - Certain Wages of American Indians Enrolled members of American Indian tribes may subtract wages earned while living and working on their tribe's reservation. The federal government must recognize these tribes. For more information, see Arizona Department of Revenue Income Tax Ruling ITR 96-4. Line C24 - Income Tax Refund from Other States You may subtract income tax refunds received from other states if both of the following apply. 1. You reported the refund as income on your federal return. 2. You did not deduct the taxes paid to the other state as an itemized deduction on a prior year Arizona return. Line C25 - Deposits and Employer Contributions Into MSAs Deposits Made Into Your MSA If you have a medical savings account (MSA), you may be able to subtract deposits made into that MSA. Make an entry here if all of the following apply. 1. You have an MSA that qualifies as an MSA under Arizona law, but not federal law. 2. Either you or your employer made deposits into that MSA during the tax year. 17 Form 140 12 3. You had to include the deposits in income on your federal income tax return. Enter the amount of the MSA deposits that you had to include in your federal adjusted gross income. Employer Contributions Made to Employee MSAs If you are an employer, you may subtract the amount contributed to your employees' MSAs that are established under Arizona law. You can subtract these contributions only to the extent not deductible for federal income tax purposes. Enter these contributions here. Line C26 - Construction of an Energy Efficient Residence For taxable years beginning from and after December 31, 2001, through December 31, 2010, Arizona law allows a subtraction for an energy efficient residence. The subtraction is allowed for selling one or more new energy efficient residences located in Arizona. The subtraction is equal to 5% of the sales price excluding commissions, taxes, interest, points, and other brokerage, finance and escrow charges. The subtraction cannot exceed $5,000 for each new qualifying residence. The taxpayer that builds the new residence may claim the subtraction when the taxpayer first sells the residence. However, the seller may elect to transfer the subtraction to the buyer. For more information, see Arizona Department of Revenue Income Tax Procedure ITP 02-1. Enter the number of residences for which you are claiming a subtraction on line C26a, then enter the amount of the subtraction on line C26. Also enter the number on line C26a on Form 140, page 1, line 151. Line C27 - Pay Received for Active Service as a Member of the Reserves, National Guard or the U.S. Armed Forces Starting with 2006, members of the U.S. armed forces may subtract pay received for active duty military service. On line C27, enter the amount of that income included in your federal adjusted gross income. Starting with 2007, members of the reserves or the National Guard may subtract pay received for active service as a reservist or as a National Guard member. This includes pay received for weekend or two-week training periods. On line C27, enter the amount of that income included in your federal adjusted gross income. NOTE: You may not subtract pay received for active duty service as a member of the U.S. Public Health Service or NOAA. The department has issued a ruling on this issue. This ruling is ITR 10-1. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Line C28 – Net Operating Loss Adjustment NOTE: This subtraction applies to only those individuals who made an election under the special federal net operating loss rules for 2008 and 2009. Under the special rules for 2008 and 2009, you could have elected to carry the net operating loss back for 3, 4 or 5 years, instead of the normal 2 years. This election would have been allowed under I.R.C. § 172(b)(1)(h) as amended by the American Recovery and Reinvestment Act of 2009 or the Worker, Homeownership, and Business Assistance Act of 2009. Arizona did not adopt the special federal net operating loss rules for losses incurred during 2008 or 2009. For Arizona purposes, you must deduct a net operating loss as if the loss was computed under I.R.C. § 172 in effect prior to the enactment of those special rules. If you made an election to deduct your 2008 or 2009 federal net operating loss under I.R.C. § 172(b)(1)(h), you may have to enter an amount here. Figure how much of the net operating loss carry forward would have been allowed as a deduction on your 2010 federal income tax return, if the election described in I.R.C. § 172(b)(1)(h) had not been made in the year of the loss. On line C28, enter the amount that exceeds the actual net operating loss carry forward that was deducted in arriving at federal adjusted gross income. Line C29 - Other Subtractions from Income Use line C29 if any of the following special circumstances apply. Attach your own schedule to the back of your return explaining any amounts entered here. A. Previously Reported Gain on Decedent's Installment Sale Prior Arizona law required acceleration of any unrecognized installment sale gain upon the death of a taxpayer. However, this acceleration could have been avoided by the posting of a bond. If acceleration was required, your federal adjusted gross income may include installment sale amounts already recognized on a decedent's final Arizona return. If your federal adjusted gross income includes such amounts, you may subtract that portion of the gain included on your federal return. B. Fiduciary Adjustment A fiduciary uses Form 141AZ, Schedule K-1 to report to you your share of the fiduciary adjustment from the trust or estate. Line 3 of Form 141AZ, Schedule K-1 shows your share of the fiduciary adjustment from the estate or trust. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a negative number, enter that amount as a subtraction. Enter the subtraction on line C29. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a positive number, enter that amount as an addition. Enter the addition on line B11. C. Partnership Income Use this adjustment if your Arizona Form 165, Schedule K-1, shows a difference between federal and state distributable income. If the difference reported on your Arizona Form 165, Schedule K-1, is a negative number, enter that difference as a subtraction. Enter the subtraction on line C29. If the difference reported on your Arizona Form 165, Schedule K-1, is a positive number, enter that difference as an addition. Enter the addition on line B11. D. Federally Taxable Arizona Municipal Interest Enter the amount of any interest income received on obligations of the State of Arizona, or any political subdivisions of Arizona, that is included in your Arizona gross income. Do not enter any Arizona municipal interest that is exempt from federal taxation and not included in your federal adjusted gross income. E. Adoption Expenses You may take this subtraction only in the year the final adoption order is granted. Enter the lesser of the total of the following adoption expenses or $3,000. When figuring your subtraction, you may include expenses incurred in prior years. 18 Form 140 13 The following expenses are qualified adoption expenses. 1. Nonreimbursed medical and hospital costs. 2. Adoption counseling. 3. Legal and agency fees. 4. Other nonrecurring costs of adoption. If filing separately, you may take the entire subtraction, or you may divide the subtraction with your spouse. However, the total subtraction taken by both you and your spouse cannot exceed $3,000. F. Qualified Wood Stove, Wood Fireplace, or Gas Fired Fireplace Arizona law provides a subtraction for converting an existing fireplace to a qualified wood stove, qualified wood fireplace, or gas fired fireplace and non-optional equipment directly related to its operation. You may subtract up to $500 of the costs incurred for converting an existing fireplace to a qualified wood stove, qualified wood fireplace, or gas fired fireplace on your property located in Arizona. When you figure your subtraction, do not include taxes, interest, or other finance charges. A qualified wood stove or a qualified wood fireplace is a residential wood heater that was manufactured on or after July 1, 1990, or sold at retail on or after July 1, 1992. The residential wood heater must also meet the U.S. Environmental Protection Agency's July 1990 particulate emissions standards. A qualified gas fired fireplace is any device that burns natural or liquefied petroleum gas as its fuel through a burner system that is permanently installed in the fireplace. The conversion of an existing wood burning fireplace to noncombustible gas logs that are permanently installed in the fireplace also qualifies as a gas fired fireplace. G. Claim of Right Adjustment for Amounts Repaid in Prior Taxable Years You must make an entry here if all of the following apply. 1. During a year prior to 2010 you were required to repay amounts held under a claim of right. 2. You computed your tax for that prior year under Arizona's claim of right provisions. 3. A net operating loss or capital loss was established due to the repayment made in the prior year. 4. You are entitled to take that net operating loss or capital loss carryover into account when computing your 2010 Arizona taxable income. 5. The amount of the loss carryover allowed to be taken into account for Arizona purposes is more than the amount included in your federal income. Enter the amount by which the loss carryover allowed for the taxable year under Arizona law is more than the amount included in your federal adjusted gross income. H. Certain Expenses Not Allowed for Federal Purposes You may subtract some expenses that you cannot deduct on your federal return when you claim certain federal tax credits. These federal tax credits are: The federal work opportunity credit The empowerment zone employment credit The credit for employer-paid social security taxes on employee cash tips The Indian employment credit If you received any of the above federal tax credits for 2010, enter the portion of wages or salaries you paid or incurred during the taxable year equal to the amount of those federal tax credits you received. I. Qualified State Tuition Program Distributions If you are a beneficiary of a qualified state tuition program, you may subtract some of the amount distributed from the program for qualified education expenses. Enter the amount of the distribution that you had to include in your federal adjusted gross income. A qualified state tuition program is a program that meets the requirements of I.R.C. § 529. J. Subtraction for World War II Victims You may subtract distributions made to you for your persecution or the persecution of your ancestors by Nazi Germany or any other Axis regime for racial, religious or political reasons. If you are the first recipient of such distributions, enter the amount of the distributions that you had to include in your federal adjusted gross income. You may also subtract items of income that are attributable to, derived from or related to assets that were stolen or hidden from or lost to you if you were persecuted by Nazi Germany or any other Axis regime for racial, religious or political reasons before, during or immediately after World War II. If you are the first recipient of such income, enter the amount of income that you had to include in your federal adjusted gross income. K. Installment Sale Income from Another State Taxed by the Other State in a Prior Taxable Year You may subtract income from an installment sale if both of the following apply: 1. The income from the sale is subject to Arizona income tax in 2010; and 2. You paid income tax to another state on that income in a prior tax year. Enter the amount of such income that you included in your Arizona gross income for 2010. Do not enter any amount that is subject to tax by both Arizona and another state in 2010. In this case, you may be eligible for a tax credit. See Form 309 for details. L. Agricultural Crops Given to Arizona Charities Arizona law allows a subtraction for qualified crop gifts made during 2010 to one or more charitable organizations. To take this subtraction, you must be engaged in the business of farming or processing agricultural crops. The crop must be grown in Arizona. You must make your gift to a charitable organization located in Arizona that is exempt from Arizona income tax. The subtraction is the larger of 80% of the wholesale market price or 80% of the most recent sale price for the contributed crop. To determine if your crop gift qualifies for this subtraction, see Arizona Department of Revenue Income Tax Procedure ITP 93-2. M. Basis Adjustment for Property Sold or Otherwise Disposed of During the Taxable Year With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer who has complied with the requirement to add back all depreciation with respect to that property on tax returns for all taxable years beginning from and after December 31, 1999, enter the amount of depreciation that has been allowed pursuant to I.R.C. § 167(a) to the extent that the amount has not already reduced Arizona taxable income in the current or prior years. (Note: The practical effect of this is to allow a subtraction for the difference in basis for any asset for which bonus depreciation has been claimed on the federal return.) 19 Form 140 14 N. Adjustment for IRC § 179 Expense Not Allowed Enter 20% of the amount entered on line B10. This same amount can also be subtracted in each of the following four taxable years, effectively amortizing the difference in treatment over five years. If you made an addition for IRC § 179 expense on your, 2006, 2007, 2008 and/or 2009 return, also enter 20% of the amount added for 2006, 2007, 2008 and/or 2009. O. Contributions to 529 College Savings Plans For taxable years 2008 through 2012, you may subtract amounts you contribute to 529 college savings plans during the taxable year. You may subtract the amount you contributed during the year up to a total of $750 ($1,500 for a married couple filing a joint return). If you are married filing separate returns, either you or your spouse may take the subtraction, or you may divide it between you, but the total taken by both of you cannot be more than $1,500. If you contribute more than $750 ($1,500 if married) during the year, your total subtraction is still limited to $750 ($1,500 if you are married). For example, Jorge and Kate are married and have two children. During 2010, Jorge and Kate, contributed $1,500 to a 529 plan for Child 1 and $1,500 to a 529 plan for Child 2. Even though Jorge and Kate contributed a total of $3,000 during 2010, they may subtract only $1,500 on their 2010 return. You may take a subtraction for a contribution that you made during 2010, to a plan that existed before 2010. You may take a subtraction for a contribution that you made during 2010, to a plan established in another state. You may take a subtraction for a contribution that you made in 2010, to any 529 college savings plan. This could be a plan established for a child, grandchild, niece, nephew, or any other person for whom a plan has been established. You cannot take a subtraction for an amount transferred from one college savings plan to a different college savings plan (a rollover). P. Previously Deferred Discharge of Indebtedness (DOI) Income Adjustment Generally, when a loan is settled for less than the amount owed, DOI income is realized by the debtor and usually must be included in the debtor’s gross income. The amount of DOI income is generally equal to the amount of loan forgiveness. DOI income also occurs when a debtor repurchases his or her own debt at a discount (a price lower than the adjusted basis issue price of the debt instrument). In debt repurchase transactions, the amount of DOI income is generally equal to the difference between the adjusted issue price and the price paid for the debt instrument. For federal purposes, a taxpayer may have made a special election for taxable years 2009 or 2010 to include DOI income in connection with the reacquisition of a business debt instrument, ratably over a 5 year period. A taxpayer that made this election will generally include this income in federal adjusted gross income beginning with the 2014 taxable year. A taxpayer would have made the federal election under I.R.C. § 108(i) as added by the American Recovery and Reinvestment Act of 2009. Arizona did not adopt the special federal DOI income deferral provisions for the 2009 or 2010 taxable year. For Arizona purposes, if you made the federal election to defer the inclusion of DOI income under I.R.C. § 108(i), you were required to add the amount of deferred DOI income to Arizona income for the year for which you made the election. (See the instructions for “Other Additions to Income.”) If you made the required addition to Arizona income on the Arizona return filed for the year in which you reacquired the debt instrument (2009 or 2010), Arizona will not tax that DOI income twice. In the year in which you include that deferred DOI income in you federal adjusted gross income, you may take a subtraction for the amount included for that year. Usually this subtraction will apply to taxable years 2014 through 2018. However, if you had to accelerate the deferral for federal purposes, this subtraction may apply to a taxable year prior to 2014. On line C29, enter the amount of previously deferred DOI income that you included in your federal adjusted gross income for the current taxable year to the extent that the amount was previously added to your Arizona income. Q. Original Issue Discount (OID) on Reacquisition of Debt Instrument For federal purposes, when a taxpayer made the special election to defer DOI income under I.R.C. § 108(i) (see letter “P” above), the taxpayer was not allowed to take a deduction with respect to the portion of any OID that accrued with respect to that DOI income, during the income deferral period. In this case, the taxpayer must deduct the aggregate amount of the OID deductions disallowed ratably over a 5 year period, beginning with the period in which the income is includible in federal adjusted gross income. Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the taxpayer federally deferred the DOI income under I.R.C. § 108(i). For Arizona purposes, you were required to add the amount of deferred DOI income to Arizona income on the return filed for the year in which you reacquired the debt instrument. Since Arizona is taxing the federally deferred DOI income for 2009 or 2010 on your 2009 or 2010 Arizona return, you may subtract the amount of OID that accrued during the taxable year with respect to that DOI income. On line C29, enter the amount of any OID that was deferred and not allowed to be deducted in computing your federal adjusted gross income for 2010 under I.R.C. § 108(i). R. Other Adjustments Other special adjustments may be necessary. Call one of the numbers listed on the back cover if any of the following apply. You are a qualified defense contractor that elected to amortize under Arizona Revised Statutes section 43-1024. You sold or disposed of property that was held for the production of income and your basis was computed under the Arizona Income Tax Act of 1954. You were an Arizona resident before December 31, 1975, and you are receiving IRA distributions from your IRA account to which you made contributions before December 31, 1975. You were an Arizona resident before December 31, 1975, and you are receiving distributions from your qualified self-employment retirement plan to which you made contributions before December 31, 1975. You deferred exploration expenses determined under Internal Revenue Code section 617 in a taxable year ending before January 1, 1990, and you have not previously taken a subtraction for those expenses. Line C30 - Total Subtractions Add lines C17 through C29. Enter the total here and on the front of your return on line 15. 20 Form 140 15 Line D31 - Last Name(s) Used in Prior Years Use line D31 if the last name that you are using on this return is not the same as the last name you used on returns filed for the last 4 years. On line D31, enter any other last name(s) that you used when filing your return during the last 4 years. Totaling Your Income Line 12 - Federal Adjusted Gross Income You must complete your federal return before you enter an amount on line 12. You must complete a 2010 federal return to determine your federal adjusted gross income even if not filing a federal return. Arizona uses federal adjusted gross income as a starting point to determine Arizona taxable income. Your federal adjusted gross income is your Arizona gross income. NOTE: Be sure to use your federal adjusted gross income and not your federal taxable income. If the amount on line 12 is more than $75,000 ($150,000 if filing a joint return), you may need to make estimated payments. See "Do You Need to Make Estimated Payments" instructions on page 4. Line 13 - Additions to Income Enter the amount from line B12, page 2, of your return. Line 15 - Subtractions From Income Enter the amount from page 2, line C17 or line C30. Figuring Your Tax Line 17 - Itemized or Standard Deductions You must decide whether to take the standard deduction or to itemize your deductions. Your Arizona income tax will be less if you take the larger of your standard deduction or your itemized deductions. When you e-File, the software completes the math for you. Your Standard Deduction If you take the standard deduction, check box 17S. If your filing status is: Your standard deduction is: Single $4,677 Married filing separately $4,677 Married filing jointly $9,354 Head of household $9,354 Your Itemized Deductions You may claim itemized deductions on your Arizona return even if you take a standard deduction on your federal return. For the most part, you may claim those deductions allowable as itemized deductions under the Internal Revenue Code. In some cases, the amount allowed for some deductions may not be the same as the amount allowable for federal purposes. You may have to adjust the amounts shown on your completed federal Form 1040, Schedule A. See Form 140 Schedule A, Itemized Deduction Adjustments to figure if you have to make any adjustments. To figure your itemized deductions, you must complete a federal Form 1040, Schedule A. Then, if required, complete Form 140 Schedule A, Itemized Deduction Adjustments. If you do not have to complete Form 140 Schedule A, Itemized Deduction Adjustments, enter the amount from federal Form 1040, Schedule A, on Form 140, line 17. NOTE: If you itemize, you must attach a copy of the completed federal Schedule A to your Arizona return. If itemizing, check box 17I. Line 18 - Personal Exemptions The amount you may claim as a personal exemption depends on your filing status. If married, the amount you may claim as a personal exemption also depends on whether you or your spouse claim dependents. You may use the chart below to figure your personal exemption. If married, you may also use Form 202 to figure your pe
Object Description
TITLE | Arizona booklet X |
CREATOR | Arizona. Dept. of Revenue. |
SUBJECT | Income tax--Arizona; |
Browse Topic |
Government and politics |
DESCRIPTION | This title contains one or more publications. |
Language | English |
Publisher | Arizona Dept. of Revenue. |
Material Collection |
State Documents |
Source Identifier | REV 1.3:T 19 |
Location | o869898616 |
REPOSITORY | Arizona State Library, Archives, and Public Records--Law and Research Library. |
Description
TITLE | Arizona booklet X 2010 vol. 1 |
DESCRIPTION | 316 pages (PDF version). File size: 3861920 Bytes. |
TYPE | Text |
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RIGHTS MANAGEMENT | Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution. |
DATE ORIGINAL | 2010 |
Time Period |
2010s (2010-2019) |
ORIGINAL FORMAT | Born digital |
Source Identifier | REV 1.3:T 19/ 2010 V. 1 |
DIGITAL IDENTIFIER | BookletX_2010_v1.pdf |
DIGITAL FORMAT |
PDF (Portable Document Format) |
REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library. |
File Size | 3861920 Bytes |
Full Text | Arizona Booklet X 2010 VOLUME 1 This booklet contains: Individual Tax Forms Corporation, Partnership, and Exempt Organization Tax Forms CAUTION The federal amounts that you use on your Arizona return may not be the same as the federal amounts from your federal tax return. Each year the Arizona State Legislature considers if they will adopt changes made to the federal tax law during the prior year. These forms assume the Legislature will adopt all federal law changes made after January 1, 2010. If you use the amounts from your 2010 federal tax return to complete your Arizona return and the Legislature does not adopt the 2010 federal changes, you may have to amend your return at a later date for any difference between Arizona and federal law. For more details, visit www.azdor.gov and click on the link for 2010 conformity. QUICK AND EASY ACCESS TO TAX HELP AND FORMS PERSONAL COMPUTER You may use a personal computer and modem to get the forms and information you need. Here is a sample of what you will fi nd when you visit our web site at www.azdor.gov: • Forms and Instructions • Brochures • Tax Rulings and Procedures • Other General Tax Information PHONE Information by phone... Individual and Corporate Income Tax: Phoenix...................................... (602) 255-3381 Toll-free from area codes 520 and 928 ............ (800) 352-4090 Withholding Tax: Phoenix...................................... (602) 255-2060 Toll-free from area codes 520 and 928 ............ (800) 843-7196 Hearing Impaired TDD User: Phoenix ..................................... (602) 542-4021 Toll-free from area codes 520 and 928.... (800) 397-0256 WALK-IN SERVICE You may get forms and information at any of our offi ces. We have offi ces at the following locations: Phoenix 1600 West Monroe Gilbert 275 East Germann Road Building 2, Suite 180 Tucson 400 West Congress Reasonable accommodations for any person with a disability can be made. Tax software does all the hard work for you! The software: Calculates Tax Does the Math Selects Forms and Schedules Makes Complex Returns Simple Checks for Errors Before You File E-Files the IRS and AZ Returns at the same time Gives Proof of E-Filing www.azdor.gov For details & eligibility Did You Know? FREE E-Fi l e Avai lable Notice As a rule, the starting point for your Arizona return is your federal adjusted gross income. To take itemized deductions, you must start with the amount shown on the federal Schedule A. This is the case for 2010, except for changes Congress made to the federal tax code during 2010 and the following apply. 1. The changes affect how you figure your federal adjusted gross income. AND/OR 2. The changes affect how you figure your itemized deductions. When federal changes are made, Arizona legislature must adopt those changes if the Arizona starting points are to be kept the same. The legislature will address this issue when it is in session during 2011. We must publish these forms before this issue will be addressed by the legislature. When we went to print, Arizona had not yet adopted any federal tax law changes made after January 1, 2010. What does this mean to you? It means that if any of the federal law changes made in 2010 apply to your 2010 return, you can opt to file your 2010 return using one of the following methods. 1. You can wait and file your 2010 return after this issue has been addressed. To do this, you may need to ask for a filing extension. You must pay 90% of the tax due by the due date of the return before any extension. 2. You can file your 2010 return assuming that the federal law changes will be adopted. If you opt for method 2, one of the following will apply. If Arizona adopts those changes, you do not have to do anything more. If Arizona does not adopt all those changes, you may need to amend your 2010 Arizona return. Your amended return will have to show the difference between the Arizona law and the federal law. If this happens, we will post more details at http://www.azdor.gov, you will need to click on the link for 2010 conformity. 3. You can file your 2010 return assuming that we will not adopt the federal law changes. If you opt for this method, you will have to do the following. You will have to research all of the federal changes made after January 1, 2010. You will have to figure out if any of those changes apply to you. You will have figure out how to make adjustments for those changes on your return. If you opt for method 3, one of the following will apply. If Arizona does not adopt those changes, you do not have to do anything more. If Arizona adopts those changes, you may need to amend your 2010 Arizona return. Your amended return will have to show the difference between what you reported and what you should have reported. If this happens, we will post more details at http://www.azdor.gov, you will need to click on the link for 2010 conformity. THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 1 CONTENTS Individual Tax Forms 131 Claim for Refund on Behalf of Deceased Taxpayer ........................................................................................ 1 140 Series Info Items of Interest ......................................................................................................................................... 3 140 Resident Personal Income Tax Return .......................................................................................................... 5 140 Schedule A Itemized Deduction Adjustments ................................................................................................................31 140A Resident Personal Income Tax Return (Short Form)......................................................................................33 140EZ Resident Personal Income Tax Return (EZ Form) ..........................................................................................49 140PY Part-Year Resident Personal Income Tax Return ..........................................................................................61 140PY Schedule A(PY) Itemized Deductions for Part-Year Residents...............................................................................................89 140PY Schedule A(PYN) Itemized Deductions for Part-Year Residents With Nonresident Income........................................................93 140NR Nonresident Personal Income Tax Return ....................................................................................................97 140NR Schedule A(NR) Itemized Deductions for Nonresidents.......................................................................................................119 140ES Individual Estimated Income Tax Payment (2011) .....................................................................................121 140ET Credit for Increased Excise Taxes ..............................................................................................................125 140PTC Property Tax Refund (Credit) Claim............................................................................................................131 140X Individual Amended Income Tax Return.....................................................................................................139 200 Request for Innocent Spouse Relief and Separation of Liability and Equitable Relief..................................149 201 Renter's Certificate of Property Taxes Paid................................................................................................159 202 Personal Exemption Allocation Election ....................................................................................................161 204 Application for Filing Extension (Individual)...............................................................................................163 221 Underpayment of Estimated Tax by Individuals..........................................................................................165 Tables Tax Tables ...............................................................................................................................................171 THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 1 CONTENTS Corporation, Partnership, and Exempt Organization Tax Forms 51 Combined or Consolidated Return Affiliation Schedule .............................................................................181 99/99T Info Exempt Organization Information Sheet ....................................................................................................185 99 Arizona Exempt Organization Annual Information Return ...........................................................................187 99T Arizona Exempt Organization Business Income Tax Return.........................................................................191 Corp. Info. Corporate Income Tax Highlights...............................................................................................................201 120 Arizona Corporation Income Tax Return.....................................................................................................203 120A Arizona Corporation Income Tax Return (Short Form) .................................................................................223 120ES Corporation Estimated Tax Payment (2011) ..............................................................................................237 120EXT Application for Automatic Extension of Time to File Corporation, Partnership, and Exempt Organization Returns .............................................................................................................239 120S Arizona S Corporation Income Tax Return..................................................................................................243 120S Schedule K-1(NR) Nonresident Shareholder's Share of Income and Deductions ....................................................................255 120W Estimated Tax Worksheet for Corporations (2011).....................................................................................257 120X Arizona Amended Corporation Income Tax Return .....................................................................................263 122 Authorization and Consent of Subsidiary Corporation to be Included in a Consolidated Income Tax Return...............................................................................................................................................271 165 Arizona Partnership Income Tax Return .....................................................................................................273 165 Schedule K-1 Resident Partner's Share of Adjustment to Partnership Income .................................................................285 165 Schedule K-1(NR) Arizona Nonresident and Out-of-State Partner's Share of Income and Deductions .....................................287 Schedule 165 EER Subtraction for Sale of New Energy Efficient Residences............................................................................289 220 Underpayment of Estimated Tax by Corporations.......................................................................................291 Schedule ACA Air Carrier Apportionment........................................................................................................................301 THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 2 CONTENTS Tax Credit Forms 300 Nonrefundable Corporate Tax Credits and Recapture ................................................................................303 301 Nonrefundable Individual Tax Credits and Recapture.................................................................................309 302 Defense Contracting Credits .....................................................................................................................315 304 Enterprise Zone Credit ..............................................................................................................................317 305 Environmental Technology Facility Credit ..................................................................................................329 306 Military Reuse Zone Credit........................................................................................................................337 307 Recycling Equipment Credit......................................................................................................................349 308 Credit for Increased Research Activities ....................................................................................................351 308-I Credit for Increased Research Activities - Individuals.................................................................................359 309 Credit for Taxes Paid to Another State or Country.......................................................................................369 310 Credit for Solar Energy Devices .................................................................................................................381 312 Agricultural Water Conservation System Credit..........................................................................................385 315 Pollution Control Credit ............................................................................................................................389 318 Credit for Taxes Paid for Coal Consumed in Generating Electrical Power.....................................................393 319 Credit for Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlets .....................397 320 Credit for Employment of TANF Recipients.................................................................................................407 321 Credit for Contributions to Charities That Provide Assistance to the Working Poor ......................................415 322 Credit for Contributions Made or Fees Paid to Public Schools ....................................................................419 323 Credit for Contributions to Private School Tuition Organizations.................................................................423 325 Agricultural Pollution Control Equipment Credit ........................................................................................427 331 Credit for Donation of School Site .............................................................................................................431 332 Credit for Healthy Forest Enterprises .........................................................................................................435 333 Credit for Employing National Guard Members..........................................................................................445 334 Motion Picture Credits.............................................................................................................................451 334-E Transferee Notice of Transfer of Motion Picture Credits..............................................................................463 334-O Transferor Notice of Transfer of Motion Picture Credits ..............................................................................465 335 Credit for Corporate Contributions to School Tuition Organizations ............................................................467 336 Credit for Solar Energy Devices - Commercial and Industrial Applications ..................................................471 337 Credit for Water Conservation System Plumbing Stub Outs ........................................................................479 338 Credit for Investment in Qualified Small Businesses ..................................................................................483 339 Credit for Water Conservation Systems......................................................................................................487 THIS PAGE INTENTIONALLY LEFT BLANK VOLUME 2 CONTENTS Tax Credit Forms (continued) 340 Credit for Donations to the Military Family Relief Fund...............................................................................489 341 Credit for Corporate Contributions to School Tuition Organizations for Displaced Students or Students With Disabilities...................................................................................................................491 342 Credit for Renewable Energy Industry ........................................................................................................495 Fiduciary Tax Forms 141AZ Arizona Fiduciary Income Tax Return .........................................................................................................499 141AZ Schedule K-1 Resident or Part-Year Resident Beneficiary's Share of Fiduciary Adjustment ..............................................515 141AZ Schedule K-1(NR) Nonresident Beneficiary's Share of Income and Share of Fiduciary Adjustment..........................................517 141AZ EER Subtraction for Energy Efficient Residences ..............................................................................................519 141AZ ES Estate or Trust Estimated Income Tax Payment (2011)...............................................................................521 141AZ EXT Application for Filing Extension (Fiduciary) ................................................................................................523 210 Notice of Assumption of Duties in a Fiduciary Capacity ..............................................................................525 Withholding Tax Forms A1-APR Arizona Annual Payment Withholding Tax Return .......................................................................................527 A1-APR EXT Application for Extension of Time to File the Arizona Annual Payment Withholding Tax Return.....................533 A1-QRT Arizona Quarterly Withholding Tax Return..................................................................................................535 A1-WP Payment of Arizona Income Tax Withheld ..................................................................................................545 A1-C Arizona Charitable Withholding Statement (2011) ....................................................................................547 A1-R Arizona Withholding Reconciliation Return................................................................................................551 A1-R EXT Application for Extension of Time to File the Arizona Withholding Reconciliation Return .............................555 A1-E Employer’s Election to Not Withhold Arizona Taxes in December (2011).....................................................557 A-4 Employee's Arizona Withholding Percentage Election and Employee’s Instructions (2011) ........................559 Instructions Employer’s Instructions for Form A-4.........................................................................................................561 A-4P Annuitant's Request for Voluntary Arizona Income Tax Withholding (2011)................................................563 A-4V Voluntary Withholding Request for Arizona Resident Employed Outside of Arizona (2011)..........................565 WEC Withholding Exemption Certificate (2011).................................................................................................567 WECI Withholding Exemption Certificate, Native Americans (2011) ....................................................................569 WECM Withholding Exemption Certificate for Military Spouses (2011) .................................................................571 Miscellaneous Tax Forms 285 General Disclosure/Representation Authorization Form...........................................................................573 450 Request for Certified Copies of Documents ..............................................................................................577 THIS PAGE INTENTIONALLY LEFT BLANK REVENUE USE ONLY. DO NOT MARK IN THIS AREA. 88 81 80 Claim for Refund on Behalf of Deceased Taxpayer Please print or type. ADOR 10412 (10) Previous ADOR 91-0010 ARIZONA FORM 131 SCHEDULE A: Complete only if you checked box (c) above. 12 Did the decedent leave a will? .................................................................................................................................... 12 a Has a personal representative been appointed for the estate of the decedent? .......................................................... 12a b If “No”, will one be appointed? ..................................................................................................................................... 12b If you answered “Yes” to 12a or 12b, do not fi le this form. The personal representative should fi le for the refund. 13 As the person claiming the refund for the decedent’s estate, will you pay out the refund according to the laws of the state where the decedent was a legal resident? ......................................................................................................... 13 If you answered “No”, a refund cannot be made until you submit a court certifi cate showing your appointment as personal representative or until you submit other evidence that you are entitled under state law to receive the refund. 4 Number and Street (permanent residence or domicile on date of death) 5City State Zip Code 6 Name of Person Claiming Refund (last, fi rst, middle initial) 7 Relationship to Decedent 8 Claimant’s Social Security or Federal I.D. No. 11 I am fi ling this claim as (check only one box): a Surviving spouse claiming a refund based on a joint return. b Court Appointed Personal Representative for the decedent’s estate. Attach a court certifi cate (issued after death) showing your appointment. c Person other than 11a or 11b claiming refund for the decedent’s estate. Complete Schedule A below, and attach a copy of the death certifi cate or proof of death. Please attach requested information and sign below. If you checked box 11c, complete Schedule A. • Attach this form to the front of the income tax return that would have been fi led if the decedent had lived. • If the refund is issued in the name of the decedent, it may be cashed with the endorsement of the executor or administrator of the estate. • Attach any required documents, certifi cates, etc., to this form. • For military personnel, the original or an authentic copy of a telegram or letter from the Department of Defense notifying the next of kin of the decedent’s death while in active service, or a death certifi cate issued by the Department of Defense will be suffi cient proof of death. • As the surviving spouse or personal representative, you may be required to fi le a fi duciary return (Form 141AZ) for the decedent’s estate. For further information concerning this form, call (602) 255-3381, or toll-free from area codes 520 and 928, call (800) 352-4090. NOTE: If you are a surviving spouse who fi led a joint return without Form 131 and you have already received a refund check in your name and your deceased spouse’s name, you may return the joint-name check with Form 131. We will issue a new check in your name and we will mail the new check to you. If this applies to you, send Form 131 along with the joint-name check to: Arizona Department of Revenue, PO Box 52138, Phoenix, AZ 85072-2138. OR OTHER TAX YEAR BEGINNING M M D D Y Y Y Y AND ENDING M M D D Y Y Y Y . I request a refund of taxes overpaid by, or on behalf of, the decedent. Under penalties of perjury, I declare that the statements made on this form have been examined by me and to the best of my knowledge, they are true, correct and complete. Signature of Person Claiming Refund Date YES NO Instructions FOR CALENDAR YEAR 20YY 9 Number and Street of Person Claiming Refund 10 City State Zip Code 1 Decedent’s Name (last, fi rst, middle initial) 2 Date of Death 3 Decedent’s Social Security No. M M D D Y Y Y Y 1 THIS PAGE INTENTIONALLY LEFT BLANK 2 Items of Interest for 2010 Extra Time for Filing 2010 Returns You have extra time to file and pay for 2010 because April 15, 2011 is a legal holiday in Washington DC. This means that your 2010 calendar year tax return is due no later than midnight, April 18, 2011. 2010 Standard Deduction the Same as 2009 For 2010, the standard deduction is the same as it was for 2009 ($4,677 for a single taxpayer or a married couple filing separate returns and $9,354 for a head of household or a married couple filing a joint return). Haiti Earthquake Relief Donations Made in 2010 but Deducted on Your 2009 Federal Return. For Arizona purposes, you must deduct any donations for Haiti relief that you made during 2010 on your 2010 Arizona return. If you deducted these donations on your 2009 federal income tax return, you must add that amount back on the 2009 Arizona return and then deduct it on your 2010 Arizona return. Discharge of Indebtedness (DOI) Income under I.R.C § 108(i) If you made the federal election to defer the inclusion of DOI income under I.R.C. § 108(i), you must make an addition to Arizona income for the amount of DOI that you deferred and excluded from your 2010 federal adjusted gross income. In future years when you include that income on your federal income tax return, you will be allowed to take a subtraction for the amount already included in Arizona income. Original Issue Discount (OID) on Reacquisition of Debt Instrument Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the taxpayer deferred the DOI income under I.R.C. § 108(i). In this case a taxpayer may subtract any OID deduction that was deferred on the federal return. In future years when the taxpayer takes this deduction on the federal return, the taxpayer will be required to make an addition to Arizona income for the amount of OID already subtracted for Arizona purposes. Special Net Operating Loss (NOL) Subtraction Rules for Losses Carried Forward from 2008 or 2009 Arizona did not adopt the federal net operating loss rules [I.R.C. § 172(b)(1)(H)] for losses incurred during 2008 or 2009. For Arizona purposes, you must deduct the loss as if you computed the loss under I.R.C. § 172 in effect prior to the enactment of those rules. An Arizona subtraction will be allowed for the difference between the actual carryforward on the federal return and the carryforward that would have been allowed as a deduction on the federal return if the election had not been made. New Refund Check-off for the “I Didn’t Pay Enough Fund’ You may give some or all of your refund to the I Didn’t Pay Enough Fund. Gifts that you make to the I Didn’t Pay Enough Fund will aid the state by going to the Arizona general fund. Nonresidents Must Now Prorate the Standard Deduction Nonresident individuals, who claim the standard deduction, must now prorate the deduction by the percentage which the taxpayer’s Arizona gross income is of the taxpayer’s federal adjusted gross income. Private School Tuition Credit If you make a donation to a private school tuition organization between January 1, 2011 and April 15, 2011, you may opt to take a credit for this donation on your 2010 return. If you do not take the credit for this donation on your 2010 return, you may take the credit on your 2011 return. See Form 323 for details. New Refundable Renewable Energy Industry Credit A taxpayer may qualify for the refundable renewable energy industry credit if the taxpayer expanded or located a qualified renewable energy operation in Arizona. See Form 342 for details. Portion of R & D Credit May Now be Refundable Starting with the 2010 taxable year, a portion of the R & D credit may be refundable to qualified taxpayers. See Form 308-I for details. Innocent Spouse Relief Form 200 Revised We have revised the Form 200 to help us process the form faster. The new Form 200 asks for a lot more information. We know that some of the questions on this form involve sensitive subjects, but we need this information to determine whether a taxpayer qualifies for relief. New Estimated Payment Form for Form 141AZ Filers A fiduciary making estimated income tax payments on behalf of an estate or trust should use new Form 141AZ ES rather than Form 140ES to make those payments. New Extension Request Form for Form 141AZ Filers A fiduciary filing for an Arizona extension or making an Arizona extension payment on behalf of an estate or trust should use new Form 141AZ EXT rather than Form 204. Special Notice for 2009 Returns Arizona did not fully conform to federal tax law changes for 2009. This means that you may have to file an amended return for 2009. Look at items 1 through 5 below. See if any of those items apply to you. If any of those items apply to you, this will affect your 2009 return. If you have already filed your 2009 return, you must file an amended return to properly report those items. If you were a full year resident during 2009 and you filed Form 140, 140A or 140EZ, you may use Form 140X-NC to correct your 2009 return. If you file Form 140X-NC and pay the entire tax due by October 17, 2011, we will not charge you any penalty or interest on that tax. The following is the list of items that affect your 2009 return. 1. You received unemployment income during 2009. You excluded up to $2,400 of that income on your 2009 federal return. 2. You claimed an itemized deduction for both the sales tax on a new motor vehicle and state income taxes on your 2009 federal return. 3. You made a cash gift during 2010 to aid Haiti earthquake victims. You claimed an itemized deduction for that gift on your 2009 federal return. 4. You elected to exclude discharge of indebtedness (DOI) income from the reacquisition of a business debt instrument on your 2009 federal return. 5. You excluded original issue discount (OID) on a debt instrument described in number 4 above from income on your 2009 federal return. If any of items 1 through 5 above apply to you, you must correct your 2009 Arizona return. To get Form 140X-NC or for more news on this topic, visit our web site at www.azdor.gov. 3 THIS PAGE INTENTIONALLY LEFT BLANK 4 88 81 80 REVENUE USE ONLY. DO NOT MARK IN THIS AREA. 98 C= Checking or S= Savings Direct Deposit of Refund: Check box 57A if your deposit will be ultimately placed in a foreign account; see instructions. 57A ROUTING NUMBER ACCOUNT NUMBER ONE STAPLE. NO TAPE. Aid to Education (entire refund only) ......... 42 00 Arizona Wildlife ............. 43 00 Citizens Clean Elections .. 44 00 Child Abuse Prevention ... 45 00 Domestic Violence Shelter ......................... 46 00 I Didn’t Pay Enough Fund 47 00 National Guard Relief Fund 48 00 Neighbors Helping Neighbors ..................... 49 00 Special Olympics ........... 50 00 Veterans’ Donations Fund 51 00 Political Gift .................. 52 00 OR FISCAL YEAR BEGINNING M M D D Y Y Y Y AND ENDING M M D D Y Y Y Y . 66 ARIZONA FORM Resident Personal Income Tax Return 140 Your First Name and Initial Last Name Your Social Security No. 1 Spouse’s First Name and Initial (if box 4 or 6 checked) Last Name Spouse’s Social Security No. 1 Current Home Address - number and street, rural route Apt. No. Daytime Phone (with area code) Home Phone (with area code) 2 94 City, Town or Post Offi ce State Zip Code 8 Age 65 or over (you and/or spouse) 9 Blind (you and/or spouse) 10 Dependents. From page 2, line A2 – do not include self or spouse. 11 Qualifying parents and ancestors of your parents. From page 2, line A5. 12 Federal adjusted gross income (from your federal return) ......................................................................................................... 12 00 13 Additions to income (from page 2, line B12) ............................................................................................................................. 13 00 14 Add lines 12 and 13 ............................................................................................................................................................. 14 00 15 Subtractions from income (from page 2, line C17 or line C30): If applicable, enter the number from line C26a .... 151 15 00 16 Arizona adjusted gross income: Subtract line 15 from line 14 .................................................................................................. 16 00 17 Deductions: Check box and enter amount. See instructions, page 15 ................ 17I ITEMIZED 17S STANDARD 17 00 18 Personal exemptions. See page 15 of the instructions .............................................................................................................. 18 00 19 Arizona taxable income: Subtract lines 17 and 18 from line 16. If less than zero, enter zero ......................................................... 19 00 20 Compute the tax using amount on line 19 and Tax Table X, Y or Optional Tax Tables ......................................................... 20 00 21 Tax from recapture of credits from Arizona Form 301, Part II, line 31 .................................................................................. 21 00 22 Subtotal of tax: Add lines 20 and 21 ....................................................................................................................................... 22 00 23 - 24 Clean Elections Fund Tax Reduction: See instructions, page 16 ............................. 231 YOURSELF 232 SPOUSE 24 00 25 Reduced tax: Subtract line 24 from line 22 ............................................................................................................................... 25 00 26 Family income tax credit from worksheet on page 17 of instructions ................................................................................... 26 00 27 Credits from Arizona Form 301, Part II, line 59, or Forms 310, 321, 322, and 323 if Form 301 is not required ................... 27 00 28 Credit type: Enter form number of each credit claimed ................ 28 3 3 3 3 29 Clean Elections Fund Tax Credit. From worksheet on page 19 of the instructions ....................................................................... 29 00 30 Balance of tax: Subtract lines 26, 27 and 29 from line 25. If the sum of lines 26, 27 and 29 is more than line 25, enter zero .............. 30 00 31 Arizona income tax withheld during 2010 ............................................................................................................................. 31 00 32 Arizona estimated tax payments for 2010 ............................................................................................................................ 32 00 33 2010 Arizona extension payment (Form 204) ....................................................................................................................... 33 00 34 Increased Excise Tax Credit from worksheet on page 19 of the instructions ....................................................................... 34 00 35 Property Tax Credit from Form 140PTC ............................................................................................................................... 35 00 36 Other refundable credits: Check the box(es) and enter the amount(s) ...................... 361 Form 308-I 362 Form 342 36 00 37 Total payments/refundable credits: Add lines 31 through 36 ............................................................................................... 37 00 38 TAX DUE: If line 30 is larger than line 37, subtract line 37 from line 30 and enter amount of tax due. Skip lines 39, 40 and 41 .............. 38 00 39 OVERPAYMENT: If line 37 is larger than line 30, subtract line 30 from line 37 and enter amount of overpayment .............................. 39 00 40 Amount of line 39 to be applied to 2011 estimated tax ......................................................................................................... 40 00 41 Balance of overpayment: Subtract line 40 from line 39 ............................................................................................................. 41 00 42 - 52 Voluntary Gifts to ........................... 53 Check only one if making a political gift ................ 531 Democratic 532 Green 533 Libertarian 534 Republican 54 Estimated payment penalty and MSA withdrawal penalty .................................................................................................... 54 00 55 Check applicable boxes ..... 551 Annualized/Other 552 Farmer or Fisherman 553 Form 221 attached 554 MSA Penalty 56 Total of lines 42 through 52 and 54 ...................................................................................................................................... 56 00 57 REFUND: Subtract line 56 from line 41. If less than zero, enter amount owed on line 58 ................................................................ 57 00 58 AMOUNT OWED: Add lines 38 and 56. Make check payable to Arizona Department of Revenue; include SSN on payment. 58 00 Payment enclosed. Check the box and attach your payment to the upper left corner of this page. 3 Attach required documents in upper left corner after page 2 of the return. Include any payment, federal and Arizona Schedules A. Exemptions Filing Status Enter the number claimed. Do not put a check mark. FOR CALENDAR YEAR 2010 ADOR 10413 (10) Previous ADOR 91-0011 82F Check box 82F if filing under extension You must enter your SSN(s). 4 Married fi ling joint return 5 Head of household .......................... NAME OF QUALIFYING CHILD OR DEPENDENT 6 Married fi ling separate return. Enter spouse’s name and Social Security No. above. 7 Single 5 ADOR 10413 (10) [Previous ADOR 91-0011] AZ Form 140 (2010) Page 2 of 2 Your Name (as shown on page 1) Your Social Security No. PART A: Dependents and Qualifying Parents - do not list yourself or spouse If completing Part A, also complete Part C, lines C15 and/or C16 and C17. A1 List children and other dependents. If more space is needed, attach a separate sheet. NO. OF MONTHS LIVED FIRST AND LAST NAME SOCIAL SECURITY NO. RELATIONSHIP IN YOUR HOME IN 2010 A2 Enter total number of persons listed in A1 here and on the front of this form, box 10; also complete Part C below. .... TOTAL A2 A3 a Enter the names of the dependents listed above who do not qualify as your dependent on your federal return: b Enter dependents listed above who were not claimed on your federal return due to education credits: A4 List qualifying parents and ancestors of your parents. If more space is needed, attach a separate sheet. You cannot list the same person here and also on line A1. For information on who is a qualifying parent or ancestor of your parents, see page 6 of the instructions. NO. OF MONTHS LIVED FIRST AND LAST NAME SOCIAL SECURITY NO. RELATIONSHIP IN YOUR HOME IN 2010 A5 Enter total number of persons listed in A4 here and on the front of this form, box 11 ................................................ TOTAL A5 PART B: Additions to Income B6 Non-Arizona municipal interest .......................................................................................................................................... B6 00 B7 Ordinary income portion of lump-sum distributions excluded on your federal return .......................................................... B7 00 B8 Total federal depreciation. Also see the instructions for line C22 .............................................................................................. B8 00 B9 Medical savings account (MSA) distributions. See page 7 of the instructions ......................................................................... B9 00 B10 I.R.C. §179 expense in excess of allowable amount. Also see the instructions for line C29 .................................................... B10 00 B11 Other additions to income. See instructions and attach your own schedule ............................................................................... B11 00 B12 Total. Add lines B6 through B11. Enter here and on the front of this form, line 13 .......................................................................... B12 00 PART C: Subtractions from Income C13 Exemption: Age 65 or over. Multiply the number in box 8, page 1, by $2,100 ......................................... C13 00 C14 Exemption: Blind. Multiply the number in box 9, page 1, by $1,500......................................................... C14 00 C15 Exemption: Dependents. Multiply the number in box 10, page 1, by $2,300 ........................................... C15 00 C16 Exemption: Qualifying parents and ancestors of your parents. Multiply the number in box 11, page 1, by $10,000 ...................................................................................................................... C16 00 C17 Total exemptions: Add lines C13 through C16. If you have no other subtractions from income, skip lines C18 through C30 and enter the amount on line C17 on Form 140, Page 1, line 15 ..................... C17 00 C18 Interest on U.S. obligations such as U.S. savings bonds and treasury bills ........................................................................ C18 00 C19 Exclusion for federal, Arizona state or local government pensions (up to $2,500 per taxpayer) ......................................... C19 00 C20 Arizona state lottery winnings included as income on your federal return (up to $5,000 only) ........................................... C20 00 C21 U.S. Social Security or Railroad Retirement Act benefi ts included as income on your federal return (the taxable amount) ... C21 00 C22 Recalculated Arizona depreciation ..................................................................................................................................... C22 00 C23 Certain wages of American Indians .................................................................................................................................... C23 00 C24 Income tax refund from other states. See instructions .......................................................................................................... C24 00 C25 Deposits and employer contributions into MSAs. See page 11 of the instructions ................................................................... C25 00 C26 Construction of an energy effi cient residence. See page 12 of the instructions. Enter the number then amount .... C26a C26 00 C27 Pay received for active service as a member of the reserves, national guard or the U.S. armed forces ............................ C27 00 C28 Net operating loss adjustment. See instructions before you enter any amount here ................................................................... C28 00 C29 Other subtractions from income. See instructions and attach your own schedule ...................................................................... C29 00 C30 Total: Add lines C17 through C29. Enter here and on the front of this form, line 15 ................................................... C30 00 Part D: Last Name(s) Used in Prior Years – if different from name(s) used in current year D31 If you are sending a payment with this return, mail to Arizona Department of Revenue, PO Box 52016, Phoenix, AZ, 85072-2016. If you are expecting a refund or owe no tax, or owe tax but are not sending a payment, mail to Arizona Department of Revenue, PO Box 52138, Phoenix, AZ, 85072-2138. PLEASE SIGN HERE I have read this return and any attachments with it. Under penalties of perjury, I declare that to the best of my knowledge and belief, they are true, correct and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. YOUR SIGNATURE DATE OCCUPATION SPOUSE’S SIGNATURE DATE SPOUSE’S OCCUPATION PAID PREPARER’S SIGNATURE DATE FIRM’S NAME (PREPARER’S IF SELF-EMPLOYED) ( ) PAID PREPARER’S TIN PAID PREPARER’S ADDRESS PAID PREPARER’S PHONE NO. 6 Arizona Form 2010 Resident Personal Income Tax Return 140 Special Notice for 2009 Returns Arizona did not fully conform to federal tax law changes for 2009. This means that you may have to file an amended return for 2009. Look at items 1 through 5 below. See if any of those items apply to you. If any of those items apply to you, this will affect your 2009 return. If you have already filed your 2009 return, you must file an amended return to properly report those items. If you were a full year resident during 2009 and you filed Form 140, 140A or 140EZ, you may use Form 140X-NC to correct your 2009 return. If you file Form 140X-NC and pay the entire tax due by October 17, 2011, we will not charge you any penalty or interest on that tax. The following is the list of items that affect your 2009 return. 1. You received unemployment income during 2009. You excluded up to $2,400 of that income on your 2009 federal return. 2. You claimed an itemized deduction for both the sales tax on a new motor vehicle and state income taxes on your 2009 federal return. 3. You made a cash gift during 2010 to aid Haiti earthquake victims. You claimed an itemized deduction for that gift on your 2009 federal return. 4. You elected to exclude discharge of indebtedness (DOI) income from the reacquisition of a business debt instrument on your 2009 federal return. 5. You excluded original issue discount (OID) on a debt instrument described in number 4 above from income on your 2009 federal return. If any of items 1 through 5 above apply to you, you must correct your 2009 Arizona return. To get Form 140X-NC or for more news on this topic, visit our web site at www.azdor.gov. Leave the Paper Behind - e-File! Quick Refunds Accurate Proof of Acceptance Free ** No more paper, math errors, or mailing delays when you e-File! Refunds in as little as 7 to 10 days with direct deposit option. e-File today, pay by April 18, 2011, to avoid penalties and interest. e-File through an Authorized IRS/DOR e-file provider or by using your Personal Computer and the Internet. Visit our web site at www.azdor.gov for a listing of approved e-file providers and on-line filing sources. ** For free e-file requirements, check out our web site at www.azdor.gov. Who Must Use Form 140? You (and your spouse if married filing a joint return) may file Form 140 only if you are full year residents of Arizona. You must use Form 140 rather than Form 140A or Form 140EZ to file for 2010 if any of the following apply to you. Your Arizona taxable income is $50,000 or more, regardless of filing status. You are making adjustments to income. You itemize deductions. You claim tax credits other than the family income tax credit, the credit for increased excise taxes, the property tax credit, or the Clean Elections Fund tax credit. You are claiming estimated payments. Do You Have to File? Arizona Filing Requirements These rules apply to all Arizona taxpayers. You must file if you are: and your Arizona adjusted gross income is at least: or your gross income is at least: Single $ 5,500 $15,000 Married filing jointly $11,000 $15,000 Married filing separately $ 5,500 $15,000 Head of household $ 5,500 $15,000 If you are an Arizona resident, you must report income from all sources. This includes out-of-state income. To see if you have to file, figure your gross income the same as you would figure your gross income for federal income tax purposes. Then, you should exclude income Arizona law does not tax. Income Arizona law does not tax includes: Interest from U.S. Government obligations Social security retirement benefits received under Title II of the Social Security Act Benefits received under the Railroad Retirement Act Active duty military pay Pay received for active service as a reservist or a National Guard member You can find your Arizona adjusted gross income on line 16 of Arizona Form 140. NOTE: Even if you do not have to file, you must still file a return to get a refund of any Arizona income tax withheld. Do You Have to File if You are an American Indian? You must file if you meet the Arizona filing requirements unless all the following apply to you. You are an enrolled member of an Indian tribe. You live on the reservation established for that tribe. You earned all of your income on that reservation. The department has issued a ruling on the Arizona tax treatment of American Indians. This ruling is ITR 96-4. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Do You Have to File if You are the Spouse of an American Indian and You are Not an Enrolled Indian? You must file if you meet the Arizona filing requirements. The department has issued a ruling on the tax treatment of 7 Form 140 2 spouses of American Indians. This ruling is ITR 96-4. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Do You Have to File if You are in the Military? You must file if you meet the Arizona filing requirements unless all the following apply to you. You are an active duty member of the United States armed forces. Your only income for the taxable year is pay received for active duty military service. There was no Arizona tax withheld from your active duty military pay. If Arizona tax was withheld from your active duty military pay, you must file an Arizona income tax return to claim any refund you may be due from that withholding. You must also file an Arizona income tax return if you have any other income besides pay received for active duty military service. If you are an Arizona resident and you have to file an Arizona return, you should file using Form 140. If you were an Arizona resident when you entered the service, you remain an Arizona resident, no matter where stationed, until you establish a new domicile. As an Arizona resident, you must report all of your income, no matter where stationed. You must include your military pay, but using Form 140, you may subtract all pay received for active duty military service, to the extent it is included in your federal adjusted gross income. If you are not an Arizona resident, but stationed in Arizona, the following applies to you. You are not subject to Arizona income tax on your military pay. You must report any other income you earn in Arizona. Use Form 140NR, Nonresident Personal Income Tax Return, to report this income. To find out more, see Arizona Department of Revenue brochure, Pub 704, Taxpayers in the Military. If You Included Your Child's Unearned Income on Your Federal Return, Does Your Child have to File an Arizona Return? No. In this case, the child should not file an Arizona return. The parent must include that same income in his or her Arizona taxable income. Residency Status If you are not sure if you are an Arizona resident for state income tax purposes, we may be able to help. The department has issued a procedure on determining residency status. This procedure is ITP 92-1. To see this procedure, visit our web site at www.azdor.gov and click on legal research and then click on procedures. Residents You are a resident of Arizona if your domicile is in Arizona. Domicile is the place where you have your permanent home. It is where you intend to return if you are living or working temporarily in another state or country. If you leave Arizona for a temporary period, you are still an Arizona resident while gone. A resident is subject to tax on all income no matter where the resident earns the income. Part-Year Residents If you are a part-year resident, you must file Form 140PY, Part-Year Resident Personal Income Tax Return. You are a part-year resident if you did either of the following during 2010. You moved into Arizona with the intent of becoming a resident. You moved out of Arizona with the intent of giving up your Arizona residency. Nonresidents If you are a nonresident, you must file Form 140NR, Nonresident Personal Income Tax Return. What if a Taxpayer Died? If a taxpayer died before filing a return for 2010, the taxpayer's spouse or personal representative may have to file and sign a return for that taxpayer. If the deceased taxpayer did not have to file a return but had tax withheld, a return must be filed to get a refund. The person who files the return should use the form the taxpayer would have used. If the department mailed the taxpayer a booklet, do not use the label. The person who files the return should print the word "deceased" after the decedent's name in the address section of the form. Also enter the date of death after the decedent's name. If your spouse died in 2010 and you did not remarry in 2010, or if your spouse died in 2011 before filing a return for 2010, you may file a joint return. If your spouse died in 2010, the joint return should show your spouse's 2010 income before death, and your income for all of 2010. If your spouse died in 2011, before filing the 2010 return, the joint return should show all of your income and all of your spouse's income for 2010. Print "Filing as surviving spouse" in the area where you sign the return. If someone else is the personal representative, he or she must also sign the return. Are Any Other Returns Required? You may also have to file a fiduciary income tax return. For details about filing a fiduciary income tax return, call the department at (602) 255-3381. Claiming a Refund for a Deceased Taxpayer If you are claiming a refund, you must complete Form 131, Claim for Refund on Behalf of Deceased Taxpayer. Attach this form to the front of the return. Find an Authorized E-File Provider An authorized E-File provider can take the guesswork out of filing taxes. To Find an Authorized e-File Provider near you log on www.azdor.gov 8 Form 140 3 What are the Filing Dates and Penalties? When Should You File? You have extra time to file and pay for 2010 because April 15, 2011 is a legal holiday in Washington DC. This means that your 2010 calendar year tax return is due no later than midnight, April 18, 2011. File your return as soon as you can after January 1, but no later than April 18, 2011. If you are a fiscal year filer, your return is due on the 15th day of the fourth month following the close of your fiscal year. What if You Cannot File on Time? You may request an extension if you know you will not be able to file on time. NOTE: An extension does not extend the time to pay your income tax. For details, see the instructions for Arizona Form 204. To get a filing extension, you can either: 1. Apply for a state extension (Form 204). To apply for a state extension, file Arizona Form 204 by April 18. See Form 204 for details. You do not have to attach a copy of the extension to your return when you file, but make sure that you check box 82F on page 1 of the return. If you must make a payment, use Arizona Form 204, or visit www.aztaxes.gov to make an electronic payment. 2. Use your federal extension (federal Form 4868). File your Arizona return by the same due date. You do not have to attach a copy of your federal extension to your return, but make sure that you check box 82F on page 1 of the return. When Should You File if You are a Nonresident Alien? The due date for your Arizona return is not the same as the due date for your federal return. Your Arizona return is due by April 18 even though your federal return is due on June 15. If you want to file your Arizona return after April 18, you must ask for a filing extension. You must file this request by April 18. Arizona will allow up to a 6-month extension. This will allow you to file your return by October 17, 2011. See Form 204 for extension filing details. If you have a federal 6-month extension, you can file your Arizona return under that extension. If you file using your federal extension, Arizona will also allow you an extra 6 months. Because we will allow only 6 months, the due date for your Arizona return is not the same as the due date for your federal return. In this case, your Arizona return will be due by October 17 even though your federal return will not be due until December 15. If you file your 2010 Arizona calendar return after October 17, 2011, your return will be late. If you are a fiscal year filer, your return is due on the 15th day of the fourth month following the close of your fiscal year. What if You File or Pay Late? If you file or pay late, we will charge you interest and penalties on the amount you owe. If the U.S. Post Office postmarks your 2010 calendar year return by April 18, 2011, your return will not be late. You may also use certain private delivery services designated by the IRS to meet the “timely mailing as timely filed” rule. Late Filing Penalty If you file late, we will charge you a late filing penalty. This penalty is 4½% of the tax required to be shown on the return for each month or fraction of a month the return is late. This penalty cannot exceed 25% of the tax found to be remaining due. Late Payment Penalty If you pay your tax late, we will charge you a late payment penalty. This penalty is ½ of 1% (.005) of the amount shown as tax for each month or fraction of a month for which the failure continues. We charge this penalty from the original due date of the return until the date you pay the tax. This penalty cannot exceed a total of 10%. Extension Underpayment Penalty If you file your return under an extension, you must pay 90% of the tax shown on your return by the return's original due date. If you do not pay this amount, we will charge you a penalty. This penalty is ½ of 1% (.005) of the tax not paid for each 30 day period or fraction of a 30 day period. We charge this penalty from the original due date of the return until the date you pay the tax. This penalty cannot exceed 25% of the unpaid tax. If we charge you the extension underpayment penalty, we will not charge you the late payment penalty under Arizona Revised Statutes section 42-1125.D. NOTE: If you are subject to two or more of the above penalties, the total cannot exceed 25%. Interest We charge interest on any tax not paid by the due date. We will charge you interest even if you have an extension. If you have an extension, we will charge you interest from the original due date until the date you pay the tax. The Arizona interest rate is the same as the federal rate. When Should You Amend a Return? If you need to make changes to your return once you have filed, you should file Form 140X, Individual Amended Return. You should file your amended return after your original return has processed. Do not file a new return for the year you are correcting. Generally, you have four years to amend a return to claim a refund. If you amend your federal return for any year, you must also file an Arizona Form 140X for that year. You must file the Form 140X within 90 days of the final determination of the IRS. If the IRS makes a change to your federal taxable income for any year, you must report that change to Arizona. You may use one of the following two options to report this change. Option 1 You may file a Form 140X for that year. If you choose this option, you must amend your Arizona return within 90 days of the final determination of the IRS. Attach a complete copy of the federal notice to your Form 140X. Option 2 You may file a copy of the final federal notice with the department within 90 days of the final determination of the IRS. If you choose this option, you must include a statement in which you must: 1. Request that the department recompute your tax; and 2. Indicate if you agree or disagree with the federal notice. If you do not agree with the federal notice, you must also include any documents that show why you do not agree. If you choose option 2, mail the federal notice and any other documents to: 9 Form 140 4 Arizona Department of Revenue 1600 W. Monroe, Attention: Individual Income Audit Phoenix, AZ 85007-2650 Do You Need to Make Estimated Payments in 2011? You must make Arizona estimated income tax payments during 2011 if: Your filing status is: AND Your Arizona gross income for 2010 was greater than: AND Your Arizona gross income for 2011 is greater than: Married Filing Joint $150,000 $150,000 Single $75,000 $75,000 Head of Household $75,000 $75,000 Married Filing Separately $75,000 $75,000 If you met the income threshold for 2010, you must make estimated payments during 2011 unless you are sure you will not meet the threshold for 2011. As a full year resident, your Arizona gross income is your federal adjusted gross income. This amount is on line 12 of the 2010 Form 140. See the worksheet for Form 140ES to figure how much your payments should be. What if You Make Your Estimated Payments Late? We will charge you a penalty if you fail to make any required payments. We will charge you a penalty if you make any of your required payments late. For details, see Arizona Form 221. Can You Make Estimated Payments Even if You Do Not Have To? If you do not have to make Arizona estimated income tax payments, you may still choose to make them. For details, see Arizona Form 140ES. Line-by-Line Instructions Tips for Preparing Your Return: Make sure that you write your SSN on your return. Complete your return using black ink. You must round dollar amounts to the nearest whole dollar. If 50 cents or more, round up to the next dollar. If less than 50 cents, round down. Do not enter cents. When asked to provide your own schedule, attach a separate sheet with your name and SSN at the top. Attach your own schedules to your return. Attach these schedules behind page 2 of your return and behind your Schedules A if itemizing. You must complete your federal return before you can start your Arizona return. Make sure you include your home telephone number. If your daytime number is not the same as your home number, make sure you include a daytime telephone number. If filing a fiscal year return, fill in the period covered in the space provided at the top of the form. Entering Your Name, Address, and SSN Lines 1, 2, and 3 - NOTE: Make sure that you write your SSN on the appropriate line. If your booklet has a peel-off label, use that label if all the information is correct. If any of the information on the label is incorrect, do not use the label. Attach the label after you finish your return. If you do not have a peel-off label, print or type your name, address, and SSN in the space provided. If you are filing a joint return, enter your SSNs in the same order as your names. If your name appears first on the return, make sure your SSN is the first number listed. If you are married filing separately, enter your name and SSN on the first line 1. Then enter your spouse’s name and SSN on second line 1. If you are a nonresident of the United States or a resident alien who does not have an SSN use the identification number (ITIN) the IRS issued to you. For a deceased taxpayer, see page 2 of these instructions. Use your current home address. The department will send your refund to or correspond with you at that address. NOTE: Make sure your SSN is correct. If you are filing a joint return, also make sure you list your SSNs in the same order every year. Make sure that you enter your SSN on your return. Make sure that all SSNs are clear and correct. You may be subject to a penalty if you fail to include your SSN. It will take longer to process your return if SSNs are missing, incorrect, or unclear. ID Numbers for Paid Preparers If you pay someone else to prepare your return, that person must also include an ID number where requested. A paid preparer may use any of the following. his or her SSN his or her PTIN the EIN for the business A paid preparer who fails to include the proper numbers may also be subject to a penalty. DO YOU HAVE A COMPLICATED RETURN? E-File makes filing a complex return simple! E-File Software Offers: Easy step-by-step instructions Error detection before filing Easy form selection Maximum deductions For a list of approved software visit our website at www.azdor.gov 10 Form 140 5 Determining Your Filing Status The filing status that you use on your Arizona return may be different from that used on your federal return. Use this section to determine your filing status. Check the correct box (4 through 7) on the front of Form 140. Line 4 Box - Married Filing a Joint Return If you are married and filing a joint return, check box 4. You may file a joint return if you were married as of December 31, 2010. It does not matter whether or not you were living with your spouse. You may file a joint return, even if you and your spouse filed separate federal returns. You may file a joint return if your spouse died during 2010 and you did not remarry in 2010. See page 2 of these instructions for details. The Arizona Form 140 is for full year residents only. You may not file a joint Arizona income tax return on Form 140 if any of the following apply. 1. Your spouse is a nonresident alien (citizen of and living in another country). 2. Your spouse is a resident of another state. 3. Your spouse is a part-year Arizona resident. If filing a joint return with your nonresident spouse, you may file a joint return using Form 140NR. See Form 140NR instructions. If filing a joint return with your part-year resident spouse, you may file a joint return using Form 140PY. See Form 140PY instructions. The department has issued a ruling on filing a joint return with your part-year resident or nonresident spouse. This ruling is ITR 95-2. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Line 5 Box - Head of Household If you are filing as a head of household, check box 5. You may file as head of household on your Arizona return, only if one of the following applies. You qualify to file as head of household on your federal return. You qualify to file as a qualifying widow or widower on your federal return. Line 6 Box - Married Filing Separately If you are filing a separate return, check box 6 and enter your spouse's name and SSN on the second line 1. If you were married as of December 31, 2010, you may choose to file a separate return. You may file a separate return, even if you and your spouse filed a joint federal return. Arizona is a community property state. If you file a separate return, you must figure how much income to report using community property laws. Under these laws, a separate return must reflect one-half of the community income from all sources plus any separate income. When you file separate returns, you must account for community deductions and credits on the same basis as community income. Both you and your spouse must either itemize or not itemize. If one of you itemizes, you both must itemize. If one of you takes a standard deduction, you both must take a standard deduction. One of you may not claim a standard deduction while the other itemizes. If you and your spouse support a dependent child from community income, either you or your spouse may claim the dependent. Both of you cannot claim the same dependent on both returns. The department has issued tax rulings on filing a separate return. These rulings are ITR 93-18 and ITR 93-19. To see these rulings, visit our web site at www.azdor.gov and click on legal research and then click on rulings. NOTE: In some cases you may treat community income as separate income. The department has issued a ruling on when you may treat community income as separate income. This ruling is ITR 93-22. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. If one spouse is a resident and the other spouse is not, other special rules may apply when filing a separate return. The department has issued a ruling on how to report income in this case. This ruling is ITR 93-20. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Line 7 Box - Single If you are filing as single, check box 7. Use this filing status if you were single on December 31, 2010. You are single if any of the following apply to you. You have never been married. You are legally separated under a decree of divorce or of separate maintenance. You were widowed before January 1, 2010, and you did not remarry in 2010, and you do not qualify to file as a qualifying widow or widower with dependent children on your federal return. Exemptions Write the number of exemptions you are claiming in boxes 8, 9, 10, and 11. Do not put a checkmark. You may lose the exemption if you put a checkmark in these boxes. You may lose the dependent exemption if you do not complete Part A, lines A1 through A3 on page 2. You may lose the exemption for qualifying parents or ancestors if you do not complete Part A, lines A4 and A5, on page 2. Line 8 Box - Age 65 and Over Write "1" in box 8 if you or your spouse were 65 or older in 2010. Write "2" in box 8 if both you and your spouse were 65 or older in 2010. Line 9 Box - Blind Write "1" in box 9 if you or your spouse are totally or partially blind. Write "2" in box 9 if both you and your spouse are totally or partially blind. If you or your spouse were partially blind as of December 31, 2010, you must get a statement certified by your eye doctor or registered optometrist that: 1. You cannot see better than 20/200 in your better eye with glasses or contact lenses or 2. Your field of vision is 20 degrees or less. If your eye condition is not likely to improve beyond the conditions listed above, you can get a statement certified by your eye doctor or registered optometrist to that effect instead. You must keep the statement for your records. 11 Form 140 6 Line 10 Box - Dependents You must complete Part A, lines A1 through A3b, on page 2 of your return before you can total your dependent exemptions. You may claim only the following as a dependent. A person that qualifies as your dependent on your federal return. NOTE: If you do not claim a dependent exemption for a student on your federal return in order to allow the student to claim a federal education credit on the student’s federal return, you may still claim the exemption on your Arizona return. For more information, see Arizona Individual Income Tax Ruling ITR 05-02. A person who is age 65 or over (related to you or not) that does not qualify as your dependent on your federal return, but one of the following applies. 1. In 2010, you paid more than one-fourth of the cost of keeping this person in an Arizona nursing care institution, an Arizona residential care institution, or an Arizona assisted living facility. Your cost must be more than $800. 2. In 2010, you paid more than $800 for either Arizona home health care or other medical costs for the person. A stillborn child if the following apply: 1. The stillbirth occurred during 2010. 2. You received a certificate of birth resulting in stillbirth from the Arizona Department of Health Services. 3. The child would have otherwise been a member of your household. Completing Line(s) A1 NOTE: If a person who qualifies as your dependent is also a qualifying parent or ancestor of your parent, you may claim that person as a dependent on line A2, or you may claim that person as a qualifying parent or ancestor of your parent on line A5. You may not claim that same person on both line A2 and line A5. Do not list the same person on line A1 that you listed on line A4. Enter the following on line(s) A1. 1. The dependent's name. If you are claiming an exemption for a stillborn child and the child was not named, enter “stillborn child” in place of a name. 2. The dependent's SSN. If you are claiming an exemption for a stillborn child enter the certificate number from the certificate of birth resulting in stillbirth. 3. The dependent's relationship to you. 4. The number of months the dependent lived in your home during 2010. If you are claiming an exemption for a stillborn child, enter the date of birth resulting in the stillbirth. You may lose the exemption if you do not furnish this information. Line A2 - Total Dependents Enter the total number of persons listed on line(s) A1. Enter the same number on the front of the return in box 10. Lines A3a and A3b - Persons You Did Not Take as Dependents on Your Federal Return On line A3a, enter the following. 1. The names of any dependents age 65 or over listed on line(s) A1 that you cannot take as a dependent on your federal return. 2. The name of any stillborn child listed on line(s) A1, if the stillborn child was named. If the stillborn child was not named, enter “stillborn child” on line A3a. Also enter the date of birth resulting in the stillbirth. On line A3b, enter the name of any student listed on line(s) A1 that you did not claim as an exemption on your federal return in order to allow that student to claim a federal education credit on the student’s federal return. Line 11 Box - Qualifying Parents and Ancestors of Your Parents A qualifying parent or ancestor of your parent may be any one of the following. Your parent or your parent’s ancestor. Your parent’s ancestor is your grand parent, great grand parent, great great grand parent, etc. If married filing a joint return, your spouse’s parent or an ancestor of your spouse’s parent. You may claim this exemption if all of the following apply. 1. The parent or ancestor of your parent lived in your principal residence for the entire taxable year. 2. You paid more than one-half of the support and maintenance costs of the parent or ancestor of your parent during the taxable year. 3. The parent or ancestor of your parent was 65 years old or older during 2010. 4. The parent or ancestor of your parent required assistance with activities of daily living, like getting in and out of bed or chairs, walking around, going outdoors, using the toilet, bathing, shaving, brushing teeth, combing hair, dressing, medicating or feeding. You must complete Part A, lines A4 and A5, on page 2 of your return before you can total your exemptions for qualifying parents and ancestors of your parents. NOTE: If a person who is a qualifying parent or ancestor of your parent also qualifies as your dependent, you may claim that person as a dependent on line A2, or you may claim that person as a qualifying parent or ancestor of your parent on line A5. You may not claim that same person on both line A2 and line A5. Do not list the same person on line A4 that you listed on line A1. FOR PEACE OF MIND…E-FILE Ask your tax professional for E-File or Do-it-yourself using the Internet www.azdor.gov 12 Form 140 7 Completing Line(s) A4 Enter the following on line(s) A4. 1. The name of the qualifying parent or ancestor of your parent. 2. The SSN of the qualifying parent or ancestor of your parent. 3. The qualifying parent’s or ancestor’s relationship to you, or your spouse if filing a joint return. 4. The number of months the qualifying parent or ancestor of your parent lived in your home during 2010. You may lose the exemption if you do not furnish this information. Line A5 - Total Qualifying Parents or Ancestors of Your Parents Enter the total number of persons listed on line(s) A4. Enter the same number on the front of the return in box 11. Additions to Income Line B6 - Non-Arizona Municipal Interest Enter the amount of interest income from non-Arizona municipal bonds that you did not include as income on your federal return. You may exclude any expenses incurred to purchase or carry the obligation. Reduce the interest income by the amount of those expenses that you could not deduct on your federal return. If you received tax exempt interest from municipal bonds, attach a schedule listing the payors and the amount received from each payor. You may also want to attach supporting documents for amounts received from Arizona municipal bonds that are exempt from Arizona income tax. These may be items such as bank statements, brokerage statements, etc. Line B7 - Ordinary Income Portion of Lump-Sum Distributions Excluded on Your Federal Return Use line B7 if you use federal averaging for lump-sum distributions from your pension or profit-sharing plan. Arizona law does not provide for averaging. Enter the amount of the distribution that you treated as ordinary income on your federal return. If you choose to treat the capital gain portion of the distribution as ordinary income, you must also include that amount. For details, see Arizona Department of Revenue Income Tax Ruling ITR 93-5. Line B8 - Total Federal Depreciation Enter the total amount of depreciation deducted on the federal return. If you make an entry here, you should also take a subtraction on line C22. To figure how much you should subtract, see the instructions for line C22. Line B9 - Medical Savings Account (MSA) Distributions For information on Arizona's MSA provisions, see the department's MSA brochure, Pub 542. You must add amounts received from an MSA here if any of the following apply. 1 - You Withdrew Funds from Your MSA for Other Than Qualified Expenses You must make an entry here if all of the following apply. 1. You withdrew money from your MSA during 2010. 2. You did not use the amount withdrawn to pay qualified medical expenses. 3. You did not have to include the withdrawal as income on your federal income tax return. Enter the amount withdrawn. 2 - Deceased Account Holder Where the Named Beneficiary is Not the Decedent's Surviving Spouse You must make an entry here if all of the following apply. 1. The account holder died during the year. 2. You are the named beneficiary of the decedent's MSA. 3. You are not the decedent's surviving spouse. 4. You did not have to include the value of the MSA as income on your federal income tax return. In this case, the MSA ceased to be an MSA. Enter the fair market value of the MSA as of the date of death, less the amount of MSA funds used within one year of the date of death, to pay the decedent's qualified medical expenses. You can reduce the fair market value by only those expenses paid from the MSA. If you pay additional medical expenses for the decedent from the MSA after you file, you may file an amended return to further reduce the fair market value of the MSA. 3 - Decedent's Final Return and No Named MSA Beneficiary Make an entry here if all of the following apply. 1. The account holder died during the year. 2. There is no named MSA beneficiary. 3. This is the decedent's final return. 4. The value of the MSA did not have to be included on the decedent's final federal income tax return. In this case, the MSA ceases to be an MSA. Enter the fair market value of the MSA as of the date of death. This rule applies in all cases in which there is no named beneficiary, even if the surviving spouse ultimately obtains the right to the MSA assets. NOTE: The following are not withdrawals. Do not enter any of the following: Amounts from the MSA used to pay qualified medical expenses. A qualified return of excess contributions. A qualified rollover. The fair market value of an MSA received by a surviving spouse who was the deceased account holder's named beneficiary. For more information about the above items, see the department's MSA brochure, Pub 542. Line B10 - I.R.C. § 179 Expense in Excess of Allowable Amount Enter the amount of IRC § 179 expense deducted on the federal return that exceeds $25,000. If you make an entry here, you should also take a subtraction on line C29 for a portion of the amount entered here. To figure how much you should subtract, see the instructions for line C29. Line B11 - Other Additions to Income Use line B11 if any of the special circumstances below apply. 13 Form 140 8 Attach your own schedule to the back of your return explaining any amounts entered here. You may either add or subtract items A through D below (line B11 or C29, respectively) depending on your situation. A. Pension Adjustments Use this adjustment if both of the following apply. 1. Arizona taxed your pension for years before 1979. 2. You reported that pension on your federal return using the percentage exclusion method. Do not use this adjustment if either of the following apply. 1. You reported your pension income as fully taxable on your federal return. 2. You reported your pension income on your federal return under the "three-year-rule". Pension Adjustment Worksheet - Line B11 Follow these steps to figure the adjustment. (Keep this worksheet for your records.) 1. Your contribution to annuity. 1. 2. Pension amount received in prior years. 2. 3. Remainder of cost (line 1 minus line 2 but not less than zero). 3. 4. Pension amount received this year. 4. 5. Subtract line 3 from line 4 (but not less than zero). 5. 6. Enter the pension amount taxable on your federal return. 6. 7. Subtract line 6 from line 5. 7. If line 7 is more than zero, enter the amount on line 7 as an addition to income. Enter the addition on line B11. If line 6 is more than line 5, enter the difference as a subtraction from income. Enter the subtraction on line C29. B. Married Persons Filing Separate Returns If you file a separate Arizona return, you must report the following income on that return. one-half of the community income from all sources. all of your separate income. If you and your spouse file a joint federal return but separate Arizona returns, you must make sure that each separate return reflects the correct income. If you begin your Arizona return with only the income that you earned during the year, you will have to adjust this income. If you file separate federal returns, each of your federal returns should already reflect the correct income. Since your separate Arizona returns will begin with the federal adjusted gross income, you will not have to adjust your income. If you have to adjust your income, attach a schedule showing how you figured your adjustment. C. Partnership Income Use this adjustment if your Arizona Form 165, Schedule K-1, shows a difference between federal and state distributable income. If the difference reported on your Arizona Form 165, Schedule K-1, is a positive number, enter that difference as an addition. Enter the addition on line B11. If the difference reported on your Arizona Form 165, Schedule K-1, is a negative number, enter that difference as a subtraction. Enter the subtraction on line C29. D. Fiduciary Adjustment A fiduciary uses Form 141AZ, Schedule K-1, to report to you your share of the fiduciary adjustment from the trust or estate. Line 3 of Form 141AZ, Schedule K-1, shows your share of the fiduciary adjustment from the estate or trust. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a positive number, enter that amount as an addition. Enter the addition on line B11. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a negative number, enter that amount as a subtraction. Enter the subtraction on line C29. E. Net Operating Losses Arizona does not have specific provisions for calculating the net operating loss of an individual. Generally, the amount of net operating loss deduction included in your federal adjusted gross income is the amount allowable for Arizona purposes. However, there are instances when the amount allowable for Arizona purposes may be different. You must adjust the amount of net operating loss deduction included in your federal adjusted gross income if you have already deducted any amount of the net operating loss included in your federal adjusted gross income for Arizona purposes. In this case, enter on line B11, the amount of net operating loss included in your federal adjusted gross income which you previously deducted for Arizona purposes. Usually, Arizona conforms to the federal net operating loss provisions, including the carryback provisions. However, Arizona did not conform to the special federal net operating loss rules for 2008 and 2009. Under the special rules for 2008 and 2009, you could have elected to carry the net operating loss back for 3, 4 or 5 years, instead of the normal 2 years. This election would have been allowed under I.R.C. § 172(b)(1)(h) as amended by the American Recovery and Reinvestment Act of 2009 or the Worker, Homeownership, and Business Assistance Act of 2009. If you deducted a federal net operating loss carryback under the federal American Recovery and Reinvestment Act of 2009 or the federal Worker, Homeownership, and Business Assistance Act of 2009, see the instructions for line C28. For information on deducting a net operating loss carryback in cases where you did not make an election under I.R.C. § 172(b)(1)(h), see Arizona Department of Revenue Income Tax Procedure ITP 99-1. F. Items Previously Deducted for Arizona Purposes Arizona statutes prohibit a taxpayer from deducting items more than once. However, under the operation of former Arizona law (1989 and prior), you could deduct certain items in greater amounts for Arizona purposes than for federal purposes. Investment interest and passive activity losses were such items. In some cases, you could have deducted such amounts in their entirety on the Arizona return. For federal purposes, the deduction for these items was limited, with the unused portions being carried forward and deducted in future years. Your Arizona return may include these previously deducted items because of the difference between the federal and former Arizona treatment. If your Arizona taxable income includes items previously deducted for Arizona purposes, you must add such amounts to your Arizona gross income. G. Claim of Right Adjustment for Amounts Repaid in 2010 You must make an entry here if all of the following apply. 1. During 2010, you were required to repay amounts held under a claim of right. 14 Form 140 9 2. The amount required to be repaid during 2010 was more than $3,000. 3. You took a deduction for the amount repaid on your 2010 federal income tax return. If the above apply, enter the amount deducted on your federal income tax return here. For more information on the Arizona claim of right provisions, see Arizona Department of Revenue Individual Income Tax Procedure ITP 95-1. H. Claim of Right Adjustment for Amounts Repaid in Prior Taxable Years You must make an entry here if all of the following apply. 1. During a year prior to 2010 you were required to repay amounts held under a claim of right. 2. You computed your tax for that prior year under Arizona's claim of right provisions. 3. A net operating loss or capital loss was established due to the repayment made in the prior year. 4. You are entitled to take that net operating loss or capital loss carryover into account when computing your 2010 Arizona taxable income. 5. The amount of the loss carryover included in your federal income is more than the amount allowed to be taken into account for Arizona purposes. Enter the amount by which the loss carryover included in your federal adjusted gross income is more than the amount allowed for the taxable year under Arizona law. I. Addition to S Corporation Income Due to Credits Claimed Shareholders of an S corporation who claim a credit passed through from an S corporation must make an addition to income for the amount of expenses disallowed by reason of claiming the credit. An S corporation that passes the following credits through to its shareholders must notify each shareholder of his or her pro rata share of the adjustment. You must enter an amount on this line when claiming any of the following credits. Agricultural water conservation system credit Environmental technology facility credit Pollution control credit Credit for solar hot water heater plumbing stub outs and electric vehicle recharge outlets Credit for employment of TANF recipients Agricultural pollution control equipment credit Motion picture credits J. Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlet Expenses If you take a credit for installing solar hot water heater plumbing stub outs or electric vehicle recharge outlets in a dwelling you constructed (Form 319), you cannot deduct any expenses for which you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return. K. Wage Expense for Employers of TANF Recipients If you take a credit for employing TANF recipients (Form 320), you cannot deduct any wage expense for which you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return. L. Motion Picture Expenses If you take a motion picture credit on Form 334, you cannot deduct any expenses deducted on your federal return related to the production, the infrastructure project or related to a transferred credit. Enter the amount of any such expenses that were deducted in computing federal adjusted gross income for which you claimed a credit. M. Agricultural Water Conservation System Credit If you take this credit (Form 312), you cannot deduct any expenses for which you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return. N. Adjusted Basis in Property for Which You Have Claimed a Credit for Investment in Qualified Small Businesses If you claim a credit for an investment in a qualified small business on Arizona Form 338, you must adjust your basis in the investment by the amount of the credit claimed. You must report this difference in basis on the Arizona return that you file for the taxable year in which you sell or otherwise dispose of the investment. If you sold or otherwise disposed of the investment during the 2010 taxable year, on line B11, enter the amount by which the adjusted basis computed under the internal revenue code with respect to that property exceeds the adjusted basis of the property computed under Arizona Revised Statutes section 43-1074.02. O. Depreciation or Amortization for a Water Conservation System If you claimed a water conservation system credit on Arizona Form 339, you may not deduct any depreciation or amortization for that system on your Arizona return. Enter the amount of depreciation or amortization claimed on your federal return for the water conservation system for which you have claimed a credit. P. Nonqualified Withdrawals from 529 College Savings Plans You must make an addition to income if you received a nonqualified withdrawal from a 529 college savings plan. You must make an addition if the withdrawal was not included in your federal adjusted gross income. The amount that you must add is the amount withdrawn, but no more than the difference between the amount of contributions subtracted in prior years and the amount added in any prior years. A nonqualified withdrawal is a withdrawal other than any of the following: 1. A qualified withdrawal. A qualified withdrawal is a withdrawal from an account to pay the qualified higher education expenses of the designated beneficiary of the account. 2. A withdrawal made as the result of the death or disability of the designated beneficiary of an account. 3. A withdrawal that is made on the account of a scholarship, or the allowance or payment described in section 135(d)(1)(B) or (C) of the internal revenue code, and that is received by the designated beneficiary, but only to the extent of the amount of this scholarship, allowance or payment. 4. A rollover or change of designated beneficiary. Q. 2010 Discharge of Indebtedness (DOI) Income Generally, when a loan is settled for less than the amount owed, DOI income is realized by the debtor and usually must be included in the debtor’s gross income. The amount of 15 Form 140 10 DOI income is generally equal to the amount of loan forgiveness. DOI income also occurs when a debtor repurchases his or her own debt at a discount (a price lower than the adjusted basis issue price of the debt instrument). In debt repurchase transactions, the amount of DOI income is generally equal to the difference between the adjusted issue price and the price paid for the debt instrument. For federal purposes, a taxpayer may have made a special election for taxable years 2009 or 2010 to include DOI income in connection with the reacquisition of a business debt instrument, ratably over a 5 year period. A taxpayer that made this election will generally include this income in federal adjusted gross income beginning with the 2014 taxable year. A taxpayer would have made the federal election under I.R.C. § 108(i) as added by the American Recovery and Reinvestment Act of 2009. Arizona did not adopt the special federal DOI income deferral provisions for the 2009 or 2010 taxable year. For Arizona purposes, if you made the federal election to defer the inclusion of DOI income under I.R.C. § 108(i), you must make an entry here. On line B11, enter the amount of DOI income that you deferred and excluded from the computation of your 2010 federal adjusted gross income under I.R.C. § 108(i). Even though you must include that DOI income on your 2010 Arizona return, Arizona will not tax that income again in the future years when you include the income in your federal adjusted gross income. If you make an entry here, also see the instructions for “Other Subtractions from Income” even though this subtraction will not apply until the year in which you include the income in your federal adjusted gross income. R. Original Issue Discount (OID) on Reacquisition of Debt Instrument For federal purposes, when a taxpayer made the special election to defer DOI income under I.R.C. § 108(i) (see letter “Q” above), the taxpayer was not allowed to take a deduction with respect to the portion of any OID that accrued with respect to that DOI income, during the income deferral period. In this case, the taxpayer had to deduct the aggregate amount of the OID deductions disallowed ratably over a 5 year period, beginning with the period in which the income was includible in federal adjusted gross income. Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the taxpayer federally deferred the DOI income. For Arizona purposes, you had to report the DOI income from a debt reacquisition in the year in which you reacquired the debt, and you were allowed to subtract any OID related to that DOI income in the year the OID accrued. (See the instructions for “Other Subtractions from Income.”) If your federal adjusted gross income includes a deduction for any accrued OID that you have already subtracted for Arizona purposes, you must make an addition to Arizona income for the amount of deferred OID deducted on your federal return. Generally, this addition will not apply until taxable year 2014 through 2018. However, if you were required to accelerate reporting of the DOI income for federal purposes and were allowed to deduct accrued OID attributable to that income on a return filed for a year prior to 2014, this addition may apply to an earlier year. On line B11, enter the amount of any previously deferred OID that you deducted in computing your 2010 federal adjusted gross income, to the extent that the amount was previously subtracted from Arizona gross income. S. Early Withdrawal of Arizona, County, City, or School Retirement System Contributions If you meet all of the following, you must enter an amount here. 1. You left your job with the State of Arizona or an Arizona county, city, or school district for reasons other than retirement. 2. When you left, you took out the contributions you had made to the retirement system while employed. 3. You deducted these contributions on your Arizona income tax returns that you filed for prior years. 4. You did not include these contributions in your federal adjusted gross income this year. If you meet all these tests, you must report as income those contributions previously deducted on your prior years' Arizona tax returns. For details, see Arizona Department of Revenue Income Tax Ruling ITR 93-7. T. Other Adjustments Other special adjustments may be necessary. You may need to make an addition for depreciation or amortization. You may also need to make an addition if you claimed certain tax credits. Call one of the numbers listed on the back cover if any of the following apply. You are a qualified defense contractor that elected to amortize under Arizona Revised Statutes section 43-1024. You sold or disposed of property that was held for the production of income and your basis was computed under the Arizona Income Tax Act of 1954. You claimed the environmental technology facility credit. You claimed the pollution control credit. You claimed the recycling equipment credit. You claimed the agricultural pollution control equipment credit. You elected to amortize the basis of a pollution control device or the cost of a child care facility under Arizona law in effect before 1990. You are still deducting amortization or depreciation for that device or facility on your federal income tax return. Line B12 - Total Additions Add lines B6 through B11. Enter the total on line B12 and on the front of your return on line 13. Subtractions From Income You may only subtract those items for which statutory authority exists. Without such authority you cannot take a subtraction. If you have any questions concerning subtractions from income, call one of the numbers listed on the back cover. NOTE: You may not subtract any amount that is allocable to income excluded from your Arizona taxable income. Line C13 - Exemption: Age 65 or Over Multiply the number in box 8 on the front of your return by $2,100 and enter the result. Line C14 - Exemption: Blind Multiply the number in box 9 on the front of your return by $1,500 and enter the result. Line C15 - Exemption: Dependents Multiply the number in box 10 on the front of your return by $2,300 and enter the result. 16 Form 140 11 Line C16 - Exemption: Qualifying Parents and Ancestors of Your Parents Multiply the number in box 11 on the front of your return by $10,000 and enter the result. Line C17 - Total Add lines C13 through C16 and enter the total. If you have no other subtractions from income, skip lines C18 through C30 and enter this total on Form 140, page 1, line 15. Line C18 - Interest on U.S. Obligations Enter the amount of interest income from U.S. Government obligations included as income on your federal return. U.S. Government obligations include obligations such as savings bonds and treasury bills. You cannot deduct any interest or other related expenses incurred to purchase or carry the obligations. If such expenses are included in your Arizona gross income, you must reduce the subtraction by such expenses. If you are itemizing deductions on your Arizona return, you must exclude such expenses from the amount deducted. NOTE: Do not subtract interest earned on FNMA or GNMA bonds since this interest is taxable by Arizona. For details, see the department's income tax ruling, ITR 06-1. Do not subtract any amount received from a qualified pension plan that invests in U.S. Government obligations. Do not subtract any amount received from an IRA that invests in U.S. Government obligations. These amounts are not interest income. For details, see Arizona Department of Revenue Income Tax Rulings ITR 96-2 and ITR 96-3. Line C19 - Exclusion for U.S. Government, Arizona State or Local Government Pensions If you receive pension income from any of the sources listed below, subtract the amount you received or $2,500, whichever is less. Include only the amount you reported as income on your federal return. If both you and your spouse receive such pension income, each spouse may subtract the amount received or $2,500, whichever is less. Public pensions from the following sources qualify for this subtraction. The United States Government Service Retirement and Disability Fund The United States Foreign Service Retirement and Disability System Retired or retainer pay of the uniformed services of the United States Any other retirement system or plan established by federal law NOTE: This applies only to those retirement plans authorized and enacted into the U.S. Code. This does not apply to a retirement plan that is only regulated by federal law (i.e., plans which must meet certain federal criteria to be qualified plans). The Arizona State Retirement System The Arizona State Retirement Plan The Corrections Officer Retirement Plan The Public Safety Personnel Retirement System The Elected Officials' Retirement Plan A retirement plan established for employees of a county, city, or town in Arizona An optional retirement program established by the Arizona Board of Regents under Arizona Revised Statutes An optional retirement program established by an Arizona community college district. NOTE: Public retirement pensions from states other than Arizona do not qualify for this subtraction. Line C20 - Arizona Lottery Winnings You may subtract up to $5,000 of winnings received in 2010 for Arizona lottery prizes. If you subtract Arizona lottery winnings here, you may have to adjust the amount of gambling losses claimed as an itemized deduction. See instructions for Form 140 Schedule A, Itemized Deduction Adjustments. Line C21 - U.S. Social Security Benefits or Railroad Retirement Benefits Arizona does not tax social security benefits received under Title II of the Social Security Act. Arizona does not tax railroad retirement benefits received from the Railroad Retirement Board under the Railroad Retirement Act. If you included such social security or railroad retirement benefits as income on your federal return, use line C21 to subtract this income. NOTE: Enter only the taxable amount (the amount that was subject to federal tax). Do not include any amount that was not subject to federal income tax. See Arizona Department of Revenue Income Tax Ruling ITR 96-1 for more information about railroad retirement benefits. Line C22 - Recalculated Arizona Depreciation Enter the total amount of depreciation allowable pursuant to IRC § 167(a) for the taxable year calculated as if you had elected not to claim bonus depreciation for eligible properties for federal purposes. Line C23 - Certain Wages of American Indians Enrolled members of American Indian tribes may subtract wages earned while living and working on their tribe's reservation. The federal government must recognize these tribes. For more information, see Arizona Department of Revenue Income Tax Ruling ITR 96-4. Line C24 - Income Tax Refund from Other States You may subtract income tax refunds received from other states if both of the following apply. 1. You reported the refund as income on your federal return. 2. You did not deduct the taxes paid to the other state as an itemized deduction on a prior year Arizona return. Line C25 - Deposits and Employer Contributions Into MSAs Deposits Made Into Your MSA If you have a medical savings account (MSA), you may be able to subtract deposits made into that MSA. Make an entry here if all of the following apply. 1. You have an MSA that qualifies as an MSA under Arizona law, but not federal law. 2. Either you or your employer made deposits into that MSA during the tax year. 17 Form 140 12 3. You had to include the deposits in income on your federal income tax return. Enter the amount of the MSA deposits that you had to include in your federal adjusted gross income. Employer Contributions Made to Employee MSAs If you are an employer, you may subtract the amount contributed to your employees' MSAs that are established under Arizona law. You can subtract these contributions only to the extent not deductible for federal income tax purposes. Enter these contributions here. Line C26 - Construction of an Energy Efficient Residence For taxable years beginning from and after December 31, 2001, through December 31, 2010, Arizona law allows a subtraction for an energy efficient residence. The subtraction is allowed for selling one or more new energy efficient residences located in Arizona. The subtraction is equal to 5% of the sales price excluding commissions, taxes, interest, points, and other brokerage, finance and escrow charges. The subtraction cannot exceed $5,000 for each new qualifying residence. The taxpayer that builds the new residence may claim the subtraction when the taxpayer first sells the residence. However, the seller may elect to transfer the subtraction to the buyer. For more information, see Arizona Department of Revenue Income Tax Procedure ITP 02-1. Enter the number of residences for which you are claiming a subtraction on line C26a, then enter the amount of the subtraction on line C26. Also enter the number on line C26a on Form 140, page 1, line 151. Line C27 - Pay Received for Active Service as a Member of the Reserves, National Guard or the U.S. Armed Forces Starting with 2006, members of the U.S. armed forces may subtract pay received for active duty military service. On line C27, enter the amount of that income included in your federal adjusted gross income. Starting with 2007, members of the reserves or the National Guard may subtract pay received for active service as a reservist or as a National Guard member. This includes pay received for weekend or two-week training periods. On line C27, enter the amount of that income included in your federal adjusted gross income. NOTE: You may not subtract pay received for active duty service as a member of the U.S. Public Health Service or NOAA. The department has issued a ruling on this issue. This ruling is ITR 10-1. To see this ruling, visit our web site at www.azdor.gov and click on legal research and then click on rulings. Line C28 – Net Operating Loss Adjustment NOTE: This subtraction applies to only those individuals who made an election under the special federal net operating loss rules for 2008 and 2009. Under the special rules for 2008 and 2009, you could have elected to carry the net operating loss back for 3, 4 or 5 years, instead of the normal 2 years. This election would have been allowed under I.R.C. § 172(b)(1)(h) as amended by the American Recovery and Reinvestment Act of 2009 or the Worker, Homeownership, and Business Assistance Act of 2009. Arizona did not adopt the special federal net operating loss rules for losses incurred during 2008 or 2009. For Arizona purposes, you must deduct a net operating loss as if the loss was computed under I.R.C. § 172 in effect prior to the enactment of those special rules. If you made an election to deduct your 2008 or 2009 federal net operating loss under I.R.C. § 172(b)(1)(h), you may have to enter an amount here. Figure how much of the net operating loss carry forward would have been allowed as a deduction on your 2010 federal income tax return, if the election described in I.R.C. § 172(b)(1)(h) had not been made in the year of the loss. On line C28, enter the amount that exceeds the actual net operating loss carry forward that was deducted in arriving at federal adjusted gross income. Line C29 - Other Subtractions from Income Use line C29 if any of the following special circumstances apply. Attach your own schedule to the back of your return explaining any amounts entered here. A. Previously Reported Gain on Decedent's Installment Sale Prior Arizona law required acceleration of any unrecognized installment sale gain upon the death of a taxpayer. However, this acceleration could have been avoided by the posting of a bond. If acceleration was required, your federal adjusted gross income may include installment sale amounts already recognized on a decedent's final Arizona return. If your federal adjusted gross income includes such amounts, you may subtract that portion of the gain included on your federal return. B. Fiduciary Adjustment A fiduciary uses Form 141AZ, Schedule K-1 to report to you your share of the fiduciary adjustment from the trust or estate. Line 3 of Form 141AZ, Schedule K-1 shows your share of the fiduciary adjustment from the estate or trust. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a negative number, enter that amount as a subtraction. Enter the subtraction on line C29. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a positive number, enter that amount as an addition. Enter the addition on line B11. C. Partnership Income Use this adjustment if your Arizona Form 165, Schedule K-1, shows a difference between federal and state distributable income. If the difference reported on your Arizona Form 165, Schedule K-1, is a negative number, enter that difference as a subtraction. Enter the subtraction on line C29. If the difference reported on your Arizona Form 165, Schedule K-1, is a positive number, enter that difference as an addition. Enter the addition on line B11. D. Federally Taxable Arizona Municipal Interest Enter the amount of any interest income received on obligations of the State of Arizona, or any political subdivisions of Arizona, that is included in your Arizona gross income. Do not enter any Arizona municipal interest that is exempt from federal taxation and not included in your federal adjusted gross income. E. Adoption Expenses You may take this subtraction only in the year the final adoption order is granted. Enter the lesser of the total of the following adoption expenses or $3,000. When figuring your subtraction, you may include expenses incurred in prior years. 18 Form 140 13 The following expenses are qualified adoption expenses. 1. Nonreimbursed medical and hospital costs. 2. Adoption counseling. 3. Legal and agency fees. 4. Other nonrecurring costs of adoption. If filing separately, you may take the entire subtraction, or you may divide the subtraction with your spouse. However, the total subtraction taken by both you and your spouse cannot exceed $3,000. F. Qualified Wood Stove, Wood Fireplace, or Gas Fired Fireplace Arizona law provides a subtraction for converting an existing fireplace to a qualified wood stove, qualified wood fireplace, or gas fired fireplace and non-optional equipment directly related to its operation. You may subtract up to $500 of the costs incurred for converting an existing fireplace to a qualified wood stove, qualified wood fireplace, or gas fired fireplace on your property located in Arizona. When you figure your subtraction, do not include taxes, interest, or other finance charges. A qualified wood stove or a qualified wood fireplace is a residential wood heater that was manufactured on or after July 1, 1990, or sold at retail on or after July 1, 1992. The residential wood heater must also meet the U.S. Environmental Protection Agency's July 1990 particulate emissions standards. A qualified gas fired fireplace is any device that burns natural or liquefied petroleum gas as its fuel through a burner system that is permanently installed in the fireplace. The conversion of an existing wood burning fireplace to noncombustible gas logs that are permanently installed in the fireplace also qualifies as a gas fired fireplace. G. Claim of Right Adjustment for Amounts Repaid in Prior Taxable Years You must make an entry here if all of the following apply. 1. During a year prior to 2010 you were required to repay amounts held under a claim of right. 2. You computed your tax for that prior year under Arizona's claim of right provisions. 3. A net operating loss or capital loss was established due to the repayment made in the prior year. 4. You are entitled to take that net operating loss or capital loss carryover into account when computing your 2010 Arizona taxable income. 5. The amount of the loss carryover allowed to be taken into account for Arizona purposes is more than the amount included in your federal income. Enter the amount by which the loss carryover allowed for the taxable year under Arizona law is more than the amount included in your federal adjusted gross income. H. Certain Expenses Not Allowed for Federal Purposes You may subtract some expenses that you cannot deduct on your federal return when you claim certain federal tax credits. These federal tax credits are: The federal work opportunity credit The empowerment zone employment credit The credit for employer-paid social security taxes on employee cash tips The Indian employment credit If you received any of the above federal tax credits for 2010, enter the portion of wages or salaries you paid or incurred during the taxable year equal to the amount of those federal tax credits you received. I. Qualified State Tuition Program Distributions If you are a beneficiary of a qualified state tuition program, you may subtract some of the amount distributed from the program for qualified education expenses. Enter the amount of the distribution that you had to include in your federal adjusted gross income. A qualified state tuition program is a program that meets the requirements of I.R.C. § 529. J. Subtraction for World War II Victims You may subtract distributions made to you for your persecution or the persecution of your ancestors by Nazi Germany or any other Axis regime for racial, religious or political reasons. If you are the first recipient of such distributions, enter the amount of the distributions that you had to include in your federal adjusted gross income. You may also subtract items of income that are attributable to, derived from or related to assets that were stolen or hidden from or lost to you if you were persecuted by Nazi Germany or any other Axis regime for racial, religious or political reasons before, during or immediately after World War II. If you are the first recipient of such income, enter the amount of income that you had to include in your federal adjusted gross income. K. Installment Sale Income from Another State Taxed by the Other State in a Prior Taxable Year You may subtract income from an installment sale if both of the following apply: 1. The income from the sale is subject to Arizona income tax in 2010; and 2. You paid income tax to another state on that income in a prior tax year. Enter the amount of such income that you included in your Arizona gross income for 2010. Do not enter any amount that is subject to tax by both Arizona and another state in 2010. In this case, you may be eligible for a tax credit. See Form 309 for details. L. Agricultural Crops Given to Arizona Charities Arizona law allows a subtraction for qualified crop gifts made during 2010 to one or more charitable organizations. To take this subtraction, you must be engaged in the business of farming or processing agricultural crops. The crop must be grown in Arizona. You must make your gift to a charitable organization located in Arizona that is exempt from Arizona income tax. The subtraction is the larger of 80% of the wholesale market price or 80% of the most recent sale price for the contributed crop. To determine if your crop gift qualifies for this subtraction, see Arizona Department of Revenue Income Tax Procedure ITP 93-2. M. Basis Adjustment for Property Sold or Otherwise Disposed of During the Taxable Year With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer who has complied with the requirement to add back all depreciation with respect to that property on tax returns for all taxable years beginning from and after December 31, 1999, enter the amount of depreciation that has been allowed pursuant to I.R.C. § 167(a) to the extent that the amount has not already reduced Arizona taxable income in the current or prior years. (Note: The practical effect of this is to allow a subtraction for the difference in basis for any asset for which bonus depreciation has been claimed on the federal return.) 19 Form 140 14 N. Adjustment for IRC § 179 Expense Not Allowed Enter 20% of the amount entered on line B10. This same amount can also be subtracted in each of the following four taxable years, effectively amortizing the difference in treatment over five years. If you made an addition for IRC § 179 expense on your, 2006, 2007, 2008 and/or 2009 return, also enter 20% of the amount added for 2006, 2007, 2008 and/or 2009. O. Contributions to 529 College Savings Plans For taxable years 2008 through 2012, you may subtract amounts you contribute to 529 college savings plans during the taxable year. You may subtract the amount you contributed during the year up to a total of $750 ($1,500 for a married couple filing a joint return). If you are married filing separate returns, either you or your spouse may take the subtraction, or you may divide it between you, but the total taken by both of you cannot be more than $1,500. If you contribute more than $750 ($1,500 if married) during the year, your total subtraction is still limited to $750 ($1,500 if you are married). For example, Jorge and Kate are married and have two children. During 2010, Jorge and Kate, contributed $1,500 to a 529 plan for Child 1 and $1,500 to a 529 plan for Child 2. Even though Jorge and Kate contributed a total of $3,000 during 2010, they may subtract only $1,500 on their 2010 return. You may take a subtraction for a contribution that you made during 2010, to a plan that existed before 2010. You may take a subtraction for a contribution that you made during 2010, to a plan established in another state. You may take a subtraction for a contribution that you made in 2010, to any 529 college savings plan. This could be a plan established for a child, grandchild, niece, nephew, or any other person for whom a plan has been established. You cannot take a subtraction for an amount transferred from one college savings plan to a different college savings plan (a rollover). P. Previously Deferred Discharge of Indebtedness (DOI) Income Adjustment Generally, when a loan is settled for less than the amount owed, DOI income is realized by the debtor and usually must be included in the debtor’s gross income. The amount of DOI income is generally equal to the amount of loan forgiveness. DOI income also occurs when a debtor repurchases his or her own debt at a discount (a price lower than the adjusted basis issue price of the debt instrument). In debt repurchase transactions, the amount of DOI income is generally equal to the difference between the adjusted issue price and the price paid for the debt instrument. For federal purposes, a taxpayer may have made a special election for taxable years 2009 or 2010 to include DOI income in connection with the reacquisition of a business debt instrument, ratably over a 5 year period. A taxpayer that made this election will generally include this income in federal adjusted gross income beginning with the 2014 taxable year. A taxpayer would have made the federal election under I.R.C. § 108(i) as added by the American Recovery and Reinvestment Act of 2009. Arizona did not adopt the special federal DOI income deferral provisions for the 2009 or 2010 taxable year. For Arizona purposes, if you made the federal election to defer the inclusion of DOI income under I.R.C. § 108(i), you were required to add the amount of deferred DOI income to Arizona income for the year for which you made the election. (See the instructions for “Other Additions to Income.”) If you made the required addition to Arizona income on the Arizona return filed for the year in which you reacquired the debt instrument (2009 or 2010), Arizona will not tax that DOI income twice. In the year in which you include that deferred DOI income in you federal adjusted gross income, you may take a subtraction for the amount included for that year. Usually this subtraction will apply to taxable years 2014 through 2018. However, if you had to accelerate the deferral for federal purposes, this subtraction may apply to a taxable year prior to 2014. On line C29, enter the amount of previously deferred DOI income that you included in your federal adjusted gross income for the current taxable year to the extent that the amount was previously added to your Arizona income. Q. Original Issue Discount (OID) on Reacquisition of Debt Instrument For federal purposes, when a taxpayer made the special election to defer DOI income under I.R.C. § 108(i) (see letter “P” above), the taxpayer was not allowed to take a deduction with respect to the portion of any OID that accrued with respect to that DOI income, during the income deferral period. In this case, the taxpayer must deduct the aggregate amount of the OID deductions disallowed ratably over a 5 year period, beginning with the period in which the income is includible in federal adjusted gross income. Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the taxpayer federally deferred the DOI income under I.R.C. § 108(i). For Arizona purposes, you were required to add the amount of deferred DOI income to Arizona income on the return filed for the year in which you reacquired the debt instrument. Since Arizona is taxing the federally deferred DOI income for 2009 or 2010 on your 2009 or 2010 Arizona return, you may subtract the amount of OID that accrued during the taxable year with respect to that DOI income. On line C29, enter the amount of any OID that was deferred and not allowed to be deducted in computing your federal adjusted gross income for 2010 under I.R.C. § 108(i). R. Other Adjustments Other special adjustments may be necessary. Call one of the numbers listed on the back cover if any of the following apply. You are a qualified defense contractor that elected to amortize under Arizona Revised Statutes section 43-1024. You sold or disposed of property that was held for the production of income and your basis was computed under the Arizona Income Tax Act of 1954. You were an Arizona resident before December 31, 1975, and you are receiving IRA distributions from your IRA account to which you made contributions before December 31, 1975. You were an Arizona resident before December 31, 1975, and you are receiving distributions from your qualified self-employment retirement plan to which you made contributions before December 31, 1975. You deferred exploration expenses determined under Internal Revenue Code section 617 in a taxable year ending before January 1, 1990, and you have not previously taken a subtraction for those expenses. Line C30 - Total Subtractions Add lines C17 through C29. Enter the total here and on the front of your return on line 15. 20 Form 140 15 Line D31 - Last Name(s) Used in Prior Years Use line D31 if the last name that you are using on this return is not the same as the last name you used on returns filed for the last 4 years. On line D31, enter any other last name(s) that you used when filing your return during the last 4 years. Totaling Your Income Line 12 - Federal Adjusted Gross Income You must complete your federal return before you enter an amount on line 12. You must complete a 2010 federal return to determine your federal adjusted gross income even if not filing a federal return. Arizona uses federal adjusted gross income as a starting point to determine Arizona taxable income. Your federal adjusted gross income is your Arizona gross income. NOTE: Be sure to use your federal adjusted gross income and not your federal taxable income. If the amount on line 12 is more than $75,000 ($150,000 if filing a joint return), you may need to make estimated payments. See "Do You Need to Make Estimated Payments" instructions on page 4. Line 13 - Additions to Income Enter the amount from line B12, page 2, of your return. Line 15 - Subtractions From Income Enter the amount from page 2, line C17 or line C30. Figuring Your Tax Line 17 - Itemized or Standard Deductions You must decide whether to take the standard deduction or to itemize your deductions. Your Arizona income tax will be less if you take the larger of your standard deduction or your itemized deductions. When you e-File, the software completes the math for you. Your Standard Deduction If you take the standard deduction, check box 17S. If your filing status is: Your standard deduction is: Single $4,677 Married filing separately $4,677 Married filing jointly $9,354 Head of household $9,354 Your Itemized Deductions You may claim itemized deductions on your Arizona return even if you take a standard deduction on your federal return. For the most part, you may claim those deductions allowable as itemized deductions under the Internal Revenue Code. In some cases, the amount allowed for some deductions may not be the same as the amount allowable for federal purposes. You may have to adjust the amounts shown on your completed federal Form 1040, Schedule A. See Form 140 Schedule A, Itemized Deduction Adjustments to figure if you have to make any adjustments. To figure your itemized deductions, you must complete a federal Form 1040, Schedule A. Then, if required, complete Form 140 Schedule A, Itemized Deduction Adjustments. If you do not have to complete Form 140 Schedule A, Itemized Deduction Adjustments, enter the amount from federal Form 1040, Schedule A, on Form 140, line 17. NOTE: If you itemize, you must attach a copy of the completed federal Schedule A to your Arizona return. If itemizing, check box 17I. Line 18 - Personal Exemptions The amount you may claim as a personal exemption depends on your filing status. If married, the amount you may claim as a personal exemption also depends on whether you or your spouse claim dependents. You may use the chart below to figure your personal exemption. If married, you may also use Form 202 to figure your pe |