Does Arizona conform to American Rescue Plan of 2021 for unemployment? And should I amend?

[rsowens]

I have a client (MFJ) who is an Arizona resident.  When they filed, we could exclude $10,200 in unemployment benefits.  But since AZ is a Community Property State we can now exclude 20,400.  I'm amending the return for another reason, but will AZ automatically make the additional deduction for the additional unemployment?  Or should I include that on the amended return?

[BobKamman]

Arizona's Department of Revenue is a political playground with novice staff who know little and care less.  A client recently called to ask about her refund because it did not show up on the online query page yet (similar to what happens with IRS) -- she was told she would have to come downtown to fill out some paperwork to avoid penalties, because her return clearly was lost.  But this is from the latest Form 140-X instructions I could find:

Line 17: Enter your corrected federal adjusted gross income. If you filed a federal amended return to exclude unemployment compensation, use the corrected federal adjusted gross income amount from Line 1 Box C of federal Form 1040X. If the IRS automatically adjusted your federal adjusted gross income, use the corrected federal adjusted gross amount from your 2020 Tax Year IRS transcript. 

https://azdor.gov/sites/default/files/media/FORMS_INDIVIDUAL_2020_140X-UI-Notice.pdf

[qbteachmt]

"we can now exclude 20,400"

I think you mean, the Feds allow you to split income, which means you split the UI (no matter which recipient one, the other, or even both) and then each person gets up to the $10,200 exclusion.

"but will AZ automatically make the additional deduction for the additional unemployment?"

I found this:

https://azdor.gov/legal-research/conformity-irc

"The American Rescue Plan of 2021 included a subtraction from federal adjusted gross income of up to $10,200 in unemployment income per person for the 2020 tax year. Taxpayers who filed their original federal return for tax year 2020 claiming the subtraction should file their Arizona return starting with federal adjusted gross income from their federal return. Taxpayers that did not take the subtraction on their original federal return and are waiting for the IRS to adjust their return to remove the subtraction should wait to amend their Arizona return. The Department is analyzing this situation and will post additional guidance soon."

"Arizona's Department of Revenue is a political playground with novice staff who know little and care less."

Apparently. I can't find that "additional guidance" that is supposed to post "soon."  🙂

They do tell you: "The instructions issued with the 2020 Arizona tax returns are correct. For a complete list of the additions and subtractions that apply to 2020, see the 2020 instructions for Arizona Form 140 (individuals) or Arizona Form 120 (corporations). The statutory additions can be found in A.R.S. § 43-1021 (A.R.S. § 43-1121 for corporations) and the subtractions in A.R.S. § 43-1022 (A.R.S. § 43-1122 for corporations)."

But it might be only 1 times $10,200: "In April, the Arizona Legislature passed SB 1752 unanimously and Governor Doug Ducey signed the bill into law. To highlight the significance of SB 1752 for Arizona taxpayers, President Leach stated, “Many Arizonans and businesses have experienced financial hardships during the pandemic, and this bill will provide immediate tax relief at a time when it is needed the most. Those out of work will now see the first $10,200 in unemployment income excluded from taxation and businesses that participated in the Paycheck Protection Program are provided clarity when filing their taxes. In total, my bill provides more than $600 million in tax relief to Arizonans. It is truly gratifying to sponsor a bill that will have such a positive impact on lives in our state.”"

I suggest checking with your AZ resources.

[BobKamman]

@qbteachmt I thought your reference to a "President Leach" expressed an opinion on Washington politics, but indeed we have a Senate President Pro Tem here in Arizona (also, a Q-Anon supporter) named Leach who takes over when the more-infamous President Fann, of fraudit fame, is elsewhere.  

[qbteachmt]

"your reference to a "President Leach" expressed an opinion"

It's not my opinion. This is an AZ article, so that would be an AZ legislator.

[BobKamman]

It's an article from the American Legislative Exchange Council, a right-wing organization that drafts legislation that its supporters then introduce as their own.