Arizona is now likely to extend its income tax filing due date to align with the temporary federal May 17 deadline, but the state has made little progress in adopting or complying with various other rule changes over the past week .
A bill to extend the state’s normal due date from April 15 to May 17 recently cleared both houses of the legislature pending action from the governor.
However, the move on a related theme of aligning with recent changes to the federal tax law has proven elusive.
Arizona and most of the states that levy income taxes routinely adjust their codes to reflect annual changes at the federal level, although doing so can result in hundreds of millions of dollars in lost revenue, as would be the case in Arizona this year. The purpose of these changes is to provide clarity and consistency for taxpayers, as gross federal income is the starting point for calculating Arizona taxes.
Most states have already adapted, but Arizona has not yet.
One notable divergence concerns, for example, unemployment income. Ordinarily, this compensation is taxable, but Congress waived that requirement for 2020 and made the first $ 10,200 in unemployment benefits a person receives tax-free at the federal level (for those earning less than $ 150,000). Currently, Arizona unemployment benefits are still taxable.
More than 2 million Arizonans received unemployment benefits in 2020. Compliance with this topic or failure to do so affects a lot of people here.
Other compliant issues include the tax treatment of withdrawals from retirement plans, as Congress relaxed those rules last year, and the tax treatment of loans made by the Paycheck Protection Program.
Accountants are divided on their advice, with some recommending that taxpayers submit as soon as possible while others suggest that people be late. If the state extends the filing date to May 17, as expected, it will provide more breathing room.
IRS to do calculations
The IRS issued guidelines on the treatment of unemployment benefits by taxpayers in late March. Usually, as mentioned earlier, unemployment benefits are taxable. However, the U.S. bailout plan, passed on March 11, stipulated that up to $ 10,200 in benefits paid per person in 2020 (up to $ 20,400 for married couples) could escape taxation for those with modified adjusted gross income below $ 150,000 .
By then, however, millions of people had already submitted their 2020 returns.
The new IRS guidelines mean these individuals will not need to file amended tax returns, much to the relief of taxpayers, tax filers, and probably even the IRS. The agency says it will reconfigure tax obligations for these people, adjust their bills, and send out any refunds due from spring and well into summer.
There are several steps to take for taxpayers who have received unemployment benefits in the past year and have not yet filed an application. The IRS has more information under an unemployment exclusion section at irs.gov.
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The revised tax accounts appear to qualify some individuals for a stimulus payment or a larger one. Such individuals “could be eligible for a new or larger payment based on their recently processed 2020 tax returns,” the IRS said in an April 2 statement responding to an unemployment question.
The most recent economic impact incentives or payments have been discontinued for singles with incomes between $ 75,000 and $ 80,000 and for married couples between $ 150,000 and $ 160,000.
Free tax assistance available
With the extended May 17 tax filing deadline, some free tax centers are expected to remain open until then, including several locations operated under the VITA or Volunteer Income Tax Program.
The VITA program, which is affiliated with the IRS, is generally open to those earning less than $ 57,000 per year, as well as those with disabilities or limited English proficiency.
Sites expected to remain open through May include those of Phoenix (phoenix.gov/eitc), Masters of Coin (mastersofcoin.org), Mesa United Way (mesaunitedway.org/volunteer-income-tax-assistance/), and A New Leaf operated websites West Valley (turnanewleaf.org/services/financial-empowerment/vita-program.html) and Rehoboth CDC (rcdcphx.org/vita-tax-preparation).
Refunds a little lower for Arizonans
As is usually the case, most taxpayers receive refunds this filing season both nationally and in Arizona.
According to a LendingTree analysis of the IRS data released on March 29, 76% of taxpayers have received or are in need of a refund averaging $ 3,660. with an average amount of $ 3,395.
Fraud is aimed at students, college staff
The IRS warns of a scam apparently targeting students and employees with .edu email addresses. Suspicious emails display the IRS logo and use subject lines with phrases such as “tax refund payment” or “recalculate your tax refund payment” to trick victims into disclosing sensitive personal information.
The IRS does not send unsolicited email to taxpayers.
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