Federal legislation enacted on March 11, 2021 included a provision to exclude up to $10,200 of unemployment benefits from federal income tax. Arizona later conformed to the tax provisions in the American Rescue Plan Act of 2021, resulting in the same $10,200 of unemployment benefits being excluded from Arizona income tax.
Who is impacted?
Arizona taxpayers who received unemployment benefits during 2020 and filed their Arizona tax return before the March 11, 2021 enactment of the American Rescue Plan Act of 2021 must amend their 2020 Arizona tax return to receive a refund of the amount of Arizona income tax they overpaid. Arizona taxpayers who received unemployment benefits during 2020 and filed their Arizona income tax return after March 11, 2021 most likely already received the benefit of the unemployment exclusion and should not file an Arizona amended return.
Regardless of whether they filed before or after March 11, however, Arizona taxpayers who received automatic federal income tax refunds of unemployment benefits from the IRS should amend their 2020 Arizona income tax return.
Will Arizona income tax refunds be issued automatically like the IRS is doing?
No. To receive an Arizona income tax refund of unemployment benefits, taxpayers will need to file an amended Arizona return (Arizona Form 140X).
When should I amend my 2020 Arizona income tax return?
You may amend your 2020 Arizona income tax return for a refund of your unemployment benefits only after you amend your 2020 federal income tax return or after the IRS automatically adjusts your 2020 federal income tax return. In order to receive a refund of your 2020 unemployment benefits you will need to amend your 2020 Arizona income tax return within 4 years of the original due date of the return.
What information do I need to have to file an Arizona amended return?
Taxpayers will need a federal transcript of their 2020 income taxes after the IRS adjusts their federal income tax return. Request a transcript at: https://www.irs.gov/individuals/get-transcript.
How do I file an Arizona amended return?
Arizona taxpayers will need to file an Arizona Form 140X to amend their 2020 Arizona tax return.
Most Arizona residents will be able to complete the Arizona Form 140X by following the simplified instructions at:
Part-year residents and nonresidents will need to refer to the full Arizona Form 140X instructions. Additionally, resident taxpayers with changes beyond unemployment, the excise tax credit, and the family tax credit will need to refer to the full Arizona Form 140X instructions at: https://azdor.gov/forms/individual/individual-amended-return-form
Can I e-file Arizona Form 140X?
The Arizona Form 140X is not currently available for e-file. It must be filed by paper.