Arizona 140-SBI

[kgudgel]

I am trying to find out whether ProSeries is going to support the new Form 140-SBI for ARIZONA.

This is a brand new form. 

When I go to the release dates, Form Info, the 140-SBI is not listed.  But when I go to release dates and click on the exclamation mark inside the circle (so the read me file), and the "Small Business Tax Forms" are listed as not being final, so don't file yet.  But it doesn't say whether they eventually will or will not be included.

I have a handful of clients which will benefit from this new form.  But how do I find out even if ProSeries is going to have it?  (Or whether I am going to need to go to a pay per return product to handle these clients.)

(Note:  there are a couple of other forms that ProSeries does not offer on the federal level, which means I am likely going to need a pay per return product anyways - but trying to decide which one means I need to know how many and which forms I need outside of ProSeries.)

[Dmash06]

Have you found out anymore information on the status of Form 140-sbi? 

[BobKamman]

How will anyone benefit from using this form?  It was designed to solve a problem that doesn't exist because the tax cut for the wealthy has been delayed by the referendum petition.  

[kgudgel]

No new info: 

The release information on 2021.180 at:  http://prodldfp.proseries.com/pro/2021/readme/readazi.htm says:

Forms

The following forms have not been finalized in this version of ProSeries/Arizona. When you open a form in the program, you might see "DO NOT FILE" in red text in the upper-right corner of the form, and you see the new, non-scrolling Form Status bar at the top of the form. The phrase DO NOT FILE - search "updating forms" for Help appears on the printed copy of the forms that are included in this version of ProSeries/Arizona. If your client's return contains any of the following, do not file that return until ProSeries/Arizona has been updated with a final, approved-for-filing version of each form included in that return:

• Small Business Tax Forms

Again, this means to me that ProSeries is still planning on including it, but has not yet.  When there was similar wording on a previous release, I called Intuit and asked them if I was reading into it too much, but the rep thought that based on this statement they would EVENTUALLY include it.

[kgudgel]

How does someone benefit?

If the taxpayers AZ taxable income puts them in the 4.5% tax bracket (3.5% surcharge tax plus the 1% income tax since the maximum tax rate is 4.5%), they may be able to take advantage of the 3.5% income tax rate on SBI income.

Since we are talking about it only helping those whose regular income tax bracket is over 3.5%.  but it isn't that "hard" to get into that tax bracket (MFJ with AZ taxable Income > $111,229 or other filing status > $55,615).  If they are already in the 4.17% or 4.5% bracket, then can choose to file the SBI and have their Schedule B, C, E, F (and some D) taxed at only 3.5%.

Whether this form solves a problem that does or does not exist is a political question.  However, the AZ legislation passed this law - and if we as tax professionals don't help our clients pay as little tax as they are legally required to pay - then we aren't doing our job.

Now, I would argue that Intuit also isn't doing their "job" in not even telling us when the form might be available (or specifically telling us that it will not if they choose not to do so).

[kgudgel]

I also found this link on the AZ DOR website showing which vendors are "approved" for which forms:
https://azdor.gov/sites/default/files/media/FORMS_approved-vendors.pdf

Lacerte is approved for the 140-SBI (as of 2/23/2022), but ProSeries is not.  So, I don't know whether they will (eventually) do it or not.

Wish someone from Intuit would respond!!!!

[BobKamman]

When I looked at it, it seemed to me that to get the 3.5% rate you also had to pay the 1% rate.  It's too early for me to get those high-income business returns -- I'll look again when one comes along.  

[kgudgel]

No.  The concept is because the income is taxed on the 140-SBI tax return it is not considered taxable income on the normal 140.  So, that last bit of income is only taxed at 3.5% (if it is "small business" income) vs. at 4.5%.

1% doesn't make a difference for most of us.  But for those who are already in the 4.5% tax bracket, it likely will.  Even $10k of Schedule B dividends (not all that unusual for even a moderate income retiree) if reported on the SBI would save a taxpayer $100.

[BobKamman]

So the coupon clippers are considered small business people.  What if they don't have the $1,500 required to file a Schedule B?  And I feel sorry for those who pay a higher tax on out-of-state municipal bond interest, and capital gain distributions.  

[mh85251]

Can't find any info from ProSeries.  Every time I run error check on an AZ return I get the message that the 140-SBI will be released in mid-March.  Waiting patiently, for now.

[kgudgel]

I talked with Customer "Support" earlier this week about another issue (the fact that the AZ141 FORCES you to answer the "estate" questions - even when you mark that it is a resident trust).

Since we were going back and forth about the AZ module, I figured I would ask about the SBI.  And of course the front line people couldn't see anything that indicated it is in the works or not in the works.  All she could say is that the programmers couldn't start working on it until the tax forms had been published.  But I told her, they were published on January 1.

So, not sure why it is that ProSeries 1) still hasn't officially responded / posted whether they are going to have this form, and 2) actually released this form.

Have a client I JUST finished.  Has just over $25k of self-employment and rental incomes - both of which qualify for SBI.  They are in the 4.17% tax bracket, so by using the SBI, would reduce taxes by 0.67% or about $170.  That is likely enough to justify filling out the form and mailing the tax packet (since the SBI has to be mailed WITH the 140).  BUT do I really want to fill it out by hand??? NO!!! 

I'm getting REALLY frustrated with the Arizona programming module for ProSeries. 

[BobKamman]

I'm working on a client with $55K on Schedule B.  At 3.5% instead of 4.17%, he saves about $400.  Huge loophole, if that's what they intended.  Mutual fund "dividends" include short-term capital gains -- why a tax break for those, and not for long-term?  Although the reduction for gains on post-2011 assets makes up all or most of the difference.  He doesn't want to file an extension, and I'm not sure that would solve the problem anyway.  

[kgudgel]

I think what the legislature / governor "intended" is to find as many ways as they could to avoid the education surcharge that was passed by Prop 208.  By creating the SBI (along with two other bills), they were hoping that at least one of them would "stick".  But it was all back room negotiations, so who knows whether they actually thought through the implications.

[BobKamman]

I noticed that you can put non-AZ muni-bond interest income on the 140-SBI also.  Nothing in the statute about that, must have just seemed like a good idea to someone at DoR.  

[kfccpa]

Yes I have been waiting also as I have several clients that it will benefit even with Prop 208 going away and every time the message that they are going to be available by mid-March reminds me that we are at mid-March and the forms are available in Lacerte and ProConnect already.  The forms have never been listed on the form availability listing so I don't know which way to proceed to file those returns since they are require separate payments, etc. 

[kgudgel]

For those of you watching this thread - If you check the Proseries Release Dates for Arizona, looks like there is another update coming out on 3/24 (so Thursday).

Hopefully, they will have the SBI form which they have "promised".

(I'm also hoping, but not holding my breath, that they will also correct the 141AZ so that you aren't required to answer the estate questions when filing a trust tax return.  We'll see if that happens.  I've been waiting several years for that - but finally have AZ DOR emails saying that ProSeries is doing it wrong, so hopefully, they will finally fix it.)

[BobKamman]

This is in a press release today from ADoR (which doesn't mention that a lot of elderly investors are considered a small business by the small-minded Legislature):

Preparing and Submitting Paper Returns

File matching forms together (in the same envelope):

Form 140-SBI is filed with Form 140.

Form 140PY-SBI is filed with Form 140PY.

Form 140NR-SBI is filed with Form 140NR.

On the SBI form, enter your individual name (and spouse name, if filing a joint return) as shown on your individual income tax return and address, not your business information.

If you use a software vendor to prepare your paper return, the return should not print a 2D barcode. If the return prints out with a 2D barcode, please cross it out before mailing to the Department. Please do not mail the return to the 2D barcode addresses. Instead, follow the instructions below for mailing.  (I assume the rest of this is on the ADoR website somewhere.)

[SandyL]

So where is the form.  It's still not in pro series and today is the 29th.

Sandra Lawes

[Frustrated-in-IL]

ProSeries, what the hell are you doing?  I continually get a message on my AZ returns saying the Arizona Small Business Income Tax Forms will be available in mid-March 2022.  When my patience was being tested last week when mid-March came and went, I called customer service and was absolutely assured and guaranteed, receiving an ironclad pledge, solemn promise, and unqualified commitment that the form would be released on March 31st.  I took you at your word, notifying my clients whose returns have been sitting here for over a month that I would be able to complete the returns on March 31st.  Well, I just downloaded version 2021.240 and no AZ forms.  In fact, when I specifically looked at AZ it shows the last update for tax season was last week on March 23rd.  What is going on here?  Are you planning a special AZ update?  If so, when?

Can you please tell us the TRUTH on this form now?  As in this minute?  Your lack of honesty and transparency is deeply disappointing.

[kfccpa]

Ditto the sentiment as I have several clients on hold here in AZ

[BobKamman]

Most of the returns I have that need the SBI are from clients who request extensions anyway -- and that in any case I don't start until the corrected 1099's are sent out by brokers in mid-March.  However, I have finished one return by taking ten minutes to complete the SBI in pen and ink, then handing it to my office assistant to use the fillable pdf online to turn it into a silk purse.  That took about half an hour, with interruptions.  I could have asked my granddaughter to come help with it, but she's busy with her duties as fifth-grade class president.  

These are not ideal circumstances, but when the going gets tough the tough figure out a work-around.  It took longer to write an instruction sheet that follows the March 24 news release from ADoR about crossing out the bar code on the 140 and mailing the two returns in the same envelope.  I did have one client who would have saved about $100 using the SBI.  I told him I did him a favor by skipping it to avoid adding $125 to his bill.  

[kgudgel]

I agree with Bob, that there is a work-around - doing it by hand.  I did that for one yesterday.  Have decided to use a spreadsheet I created to figure out which clients will benefit (by more than my fee) and will offer up to them to file an extension because my software STILL doesn't have it.

But the problem that still hasn't been addressed is ProSeries' lack of support of AZ semi-specialized forms and their technical support of us.  This season I have had issues with:

• Trusts (AZ-141) requiring answers to questions E5 & E6.  Those should ONLY be answered by estates.  (Issue was reported in 2020, but still not fixed)
• Amended 140-X requiring a Name to be entered even though the name hasn't changed
• And the SBI

Yes, there are work-arounds for all of these.  But I shouldn't have to use a work-around. 

AND - ProSeries seems to want us to use this forum to ask questions, but then is silent when there is an issue on AZ forms what has to be addressed by programming.

There was recently a discussion on the NAEA web forums about software.  A new preparer asking about the cheapest software out there and other EAs saying don't go for the cheapest.  On the other hand we can't all afford the most expensive either (and shouldn't need to go there if we prepare "standard" tax returns). 

Proseries is in the middle of the price and forms they support.  And at the beginning of the season, when I first inquired whether ProSeries was going to support the SBI form - I would have been OK if they had said no.  But I do expect my software to follow-up on what they promise and for the forms that they do support to provide accurate and error free forms.  On the Arizona side, Proseries is definitely lacking in this area.

[BobKamman]

I haven't had this issue yet but I know it's coming.  What if ALL the taxpayer's income is from an SBI?  Does all of it have to be taxed at 3.5%, or can the lower tax brackets be used for the first dollars?

Maybe that's what the programmers are pondering.  

[kgudgel]

I read the actual legislation before teaching a class on AZ Updates and I recall it said something about if you elected to use the SBI you had to put all your SBI on it.  I was reading it to kind of see whether someone who had perhaps half Schedule C, and then had Schedule E (maybe rental or S-corp) - and interpreted it that they had to put all of it on SBI or none.  So, no I don't think if someone has mostly self-employment that they can put only up to the 4.17% bracket on the 140, and then the rest on the SBI. 

[kfccpa]

Yes, I believe it is an all or nothing approach.

[IntuitGabi]

The 2021 SBI forms (including AZ 140-SBI) are currently in development, there is no ETA at the moment. We suggest planning extensions for these returns since the SBI forms are not yet available. 

[Frustrated-in-IL]

Thank you.  I am reading this to mean sometime before October 17,2022 these forms will be available and fully functional with the ProSeries 2021 tax program.

I am far from the best CPA that there is but I try to take pride in being honest and straight forward with my clients. Unfortunately, ProSeries makes that difficult from time to time by not being forthcoming with information, or providing conflicting information.  I do not want to yet again be put in a situation with my clients because I relied on ProSeries info which turns out to be incorrect. 

[BobKamman]

Took a week off, came back to fill out one by hand, find that the software has been updated and now the 140-SBI is available!  What's more, the answer it comes up with is the same as what I found before I noticed the update.  

I think it will take longer to explain to clients why they need to file two returns, and hope the refund on one pays the balance due on the other.  (Actually, there's money left over, but I'm not going to risk a credit-elect.)

[gary1861]

Read the ADOR FAQ's - any overpayment on either 140-SBI or on the 140 - will offset any amount owed on the other one.  The FAQ's came out in April after the court cases killing Prop 208 and validating the new flat rate for 2022.  Of course, when I was filing extensions for SBI clients, we didn't have the FAQ's yet, so I printed an SBI extend form and had the client pay, but that form doesn't exist in ProSeries, so you have to manually enter that on the SBI form.

[kgudgel]

I agree that explaining to clients that they need to file two tax returns (and that they need to be MAILED TOGETHER) has been a challenge.  But that wasn't something that ProSeries / Intuit can change.

But I do wish that when they added the SBI, that the refund monitor would net the regular AZ-140 and the SBI.  But since we will likely only be doing this for one year (and they per AZ law are two separate tax returns), I can understand why the refund monitor only shows the AZ-140 amounts.