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Small Business Income Election Steps to Note

March 24, 2022
News

Phoenix, AZ—The Arizona Department of Revenue (ADOR) reminds small businesses they may elect to file a separate small business income tax return to report their share of Arizona small business gross income. As this is a new tax form, ADOR advises taxpayers of several helpful tips to ensure faster processing and eligibility.

A taxpayer makes the small business income tax election by timely filing a Small Business Income Tax return along with their timely filed individual income tax form (Form 140, Form 140NR, or Form 140PY).

The due date is April 18 for calendar year filers because April 15, 2022 falls on a federal holiday. The small business income (SBI) tax return is considered timely if filed together with the regular income tax return on or before the due date (including valid extensions).

If you file Form 204 requesting an extension for your individual income tax return, it will also apply to the small business income return. Do not file a separate filing extension request for the small business income return. When making an extension payment with Form 204, the payment will only apply to the individual income tax return. To file an extension payment for the small business income return, file Form 204-SBI with the payment.

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.  
  • If you are sending a payment for the individual income tax return or the small business income return, you must mail both returns to the Arizona Department of Revenue, PO Box 52016, Phoenix, AZ 85072.
  • If you are receiving a refund or no tax amount due on both the individual income tax return and the small business income return, mail both to the Arizona Department of Revenue, PO Box 52138, Phoenix, AZ 85072.
  • Elections made after the original due date or valid extended due date will be disallowed. 

 

Payment / Refund

  • For tax year 2021, a taxpayer was not required to remit SBI estimated tax payments. The Department will not assess a penalty for underpayment of estimated taxes on any amount not remitted. 
  • Beginning with tax year 2022, a taxpayer must pay estimated tax in four equal installments (25% of the required annual estimated tax payment) if the taxpayer’s liability is at least $1,000. Use Form 140ES-SBI, Individual Estimated Income Tax Payment (Small Business Income Tax Return), to remit the correct amount of quarterly estimated taxes. If the taxpayer fails to remit the mandatory estimated tax payment (Form 140ES-SBI), the Department may assess an underpayment of estimated taxes penalty on any amount not timely remitted.
  • Check Where’s My Refund on AZTaxes.gov. Overpayment (refund) will not be sent until individual income tax return and small business income return are processed. 
  • If a taxpayer has an overpayment on Form 140, 140NR, or 140PY, but a tax due on Form 140-SBI, 140NR-SBI, or 140PY-SBI, the refund will be applied to the Form 140-SBI, 140NR-SBI, or 140PY-SBI tax due before the refund is issued. 
  • If a taxpayer has an overpayment on Form 140-SBI, 140NR-SBI, or 140PY-SBI, but tax due on Form 140, 140NR, or 140PY, the refund will be applied to the Form 140, 140NR, or 140PY tax due before the refund is issued.
  • Do not send a payment for the tax due if the overpayment will cover the tax due.
  • We encourage taxpayers to make payments online on AZTaxes.gov by e-check or credit card under “Make an Individual/Small Business Income Payment” and “140V” or “140V-SBI.” 
  • To avoid processing delays of your paper payment after filing the returns electronically, taxpayers must provide their tax identification numbers and tax period on the check memo line and submit it with Form 140V-SBI. Do not send a paper copy of a return with payment.

 

Amended

  • If you need to amend your Form 140, 140NR, or 140PY, file Form 140X with your amended additions and subtractions, and if making a new SBI election, file an original Form 140-SBI, 140NR-SBI, or 140PY-SBI, prior to the original due date of the return or extended due date of the return for which you had a valid extension. Form 140-SBI, 140NR-SBI, or 140PY-SBI must be filed timely for the election to be effective. 
  • If you need to make changes to your small business tax return after you have filed, do not file a new small business tax return. You must file Arizona Form 140X-SBI, Small business Amended Income Tax Return. File your amended return after your original return has been processed. 
  • If you change the amount of small business income (lines 4-9) reported on the SBI tax return, you must also amend your original tax return (Form 140X) to correct the amount of the SBI adjustment to federal adjusted gross income. 

 

Learn more about small business income and frequently asked questions here.

 

 

Thursday, March 24, 2022