July 1 is the start of the Arizona State fiscal year which is why several changes are going into effect on that date.
AZ Withholding Tax Change: On July 1, 2010 an employer must withhold Arizona state income tax according to the new A4s, which they should have obtained from all of their employees prior to that date. We have prevously blogged about the change coming to the Arizona A4. On July 1st Arizona’s state income tax withholding rate will decouple from the federal withholding rate. Every employee needs to do a new A4. An employer should not advise employees about how to complete the form except to point out the form comes with worksheet to assist them. That said, a quick and dirty calculation would be to see how much tax you owed to the state last year and divide it by your Arizona state income; but of course this assumes that your income, expenses, marital status, dependents, items of credit and deduction, etc. are similar to last year, which it may not be.
AZ Child Support Garnishments Change: If you are an employer who does garnishments for things like child support in Arizona through CLEARINGHOUSE, please be advised that the fee will increase from $2.25 to $5.00 starting July 1.
In addition to these changes that go into effect in less than a week, there are other things you should aware of.
Transaction Privilege Tax License Change: You are probably aware that the Arizona “sales tax” increased 1% statewide on June 1st, and you should have already adjusted your software, point of sales systems and registers. However sometime in September the AZ DOR is going to be sending out Transaction Privilege Tax renewal forms. The only people who won’t have to renew their licenses are those who got their licenses on or after July 1, 2009. The law increases the fee to obtain, change or renew a license to $40 up from $12 for a period of 1 year and 2 weeks starting June 15, 2010; means the change will be in effect for the state’s entire upcoming fiscal year. It’s not expected to be a big revenue raiser, but the AZ DOR hopes to get people who have never filed a TPT return or who haven’t filed in a long time off the sales tax rolls. If you’e had your license a year or longer, you will need to pay for the renewal if you want to keep it.
Nonconformity with Federal 2009 tax forms: This change quietly went into effect on April 27, 2010. The State of Arizona decided not to conform to the Federal Tax code after the first tax deadline had passed. If you filed your tax form on or before April 15, 2010 and you had any of the following items of income, deduction or credit on your tax return-you may need to file an amended Arizona tax return and pay additional tax. You do not need to amend your federal tax return, just Arizona’s.
- Unemployment: you need to add the $2400 the federal government exempted from gross income back into your Arizona income and pay the additional tax.
- Automobile Sales Tax deduction: you need to remove the automobile sales tax from your deductions, which will increase your income and you may owe additional tax.
- Haiti Contributions made between January 11 and before March 1, 2010 that were taken as a charitable deduction in 2009. These contributions will be eligible charitable deductions on your Arizona taxes in 2010. Again this will increase your income and you may owe additional tax.
- Discharge of Indebtedness (DOI) Income From Business Indebtedness Discharged by the Reacquisition of a Debt Instrument-the feds allowed it to be added ratably over 5 years, AZ did not.
- Original Issue Discount (OID) on Reacquisition of Debt Instrument-the feds allowed the income to be deferred, AZ did not.
- Special Federal Net Operating Loss (NOL) Carryback Rules for 2008 and 2009 Losses-the feds allowed a special longer carryback period of 3, 4, or 5 years, instead of 2, AZ did not.
The amended tax form is 140X for individual taxpayers and it can be found on the AZ DOR website. There is more information about AZ 2009 nonconformity here. These links take you to the Arizona Department of Revenue website and you will be subject to their privacy policies etc.; Art and Business Consulting LLC is not affilicated with the AZ DOR.
If you live in another state, check with your state’s department of revenue regarding conformity issues with respect to your state.
As always Art and Business Consulting is here to help. If you need help filing an amended Arizona tax return, or any other with a small business and or tax issue, please give us a call.
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