New AZ SBI tax and interaction with AZ140 Income Tax
Arizona now has two separate state income tax returns:
AZ Income tax (what everyone is used to) and
AZ SBI (small business income) tax.
The goal was to limit tax on certain types of income (interest, dividends, rental, self-employment, partnership, S-corp, etc) to 3.5%. In general, this benefits taxpayers with these types of income AND total income exceeding 55K (single) of 111K (filing jointly).
The SBI "always" has a balance due, as it's a new tax so no estimated payments were made.
If AZ 140 income tax also has a balance due, there would be two separate payments (with combined total less than for AZ 140 tax without the lower SBI tax).
If AZ 140 had a refund, it was originally required to pay the SBI tax and wait for a refund.
This changed in recent weeks so the two taxes now net against each other; if the tax result a net refund no payment is required.
However, software developers have not caught up yet. This means the vouchers and instructions produced by the software will provide the gross refund for AZ 140 and recommend you write a check for the SBI tax.
For Krey CPA clients, we are doing our best to manually edit this language. To clarify, you do not need to write a check. Please read the separate paragraph in your letter, and instead anticipate your AZ refund to be reduced by the SBI tax amount.