Arizona is an attractive state for businesses considering improving their bottom line. After all, the state has a flat 2.5% individual income tax rate, and a 4.9% corporate income tax rate. Arizona boasts limited regulations, and offers various incentives to businesses.
Understanding the cost of apportionment in the state can help you accurately report earnings to the IRS and local government.
Corporations
- Filing Requirements. Corporations taxed as S Corporations under Subchapter S of the Internal Revenue Code (IRC) must file Arizona Form 120S. Qualified subchapter S subsidiaries are not treated as entities separate from the parent corporation and would be included on a single Arizona Form 120S filed by the parent S Corporation.
- Allocation and Apportionment. Arizona follows the cost of performance rule in sourcing receipts from the performance of services to the state.
Partnerships
Filing Requirements. In Arizona, Form 165 is to be filed for every domestic partnership including syndicates, groups, pools, joint ventures, and every foreign partnership (syndicate, pool, etc.) required to file an Arizona Partnership Income Tax Return.
Employees & individual filers
- Filing requirements. Arizona residents, and their spouses if married filing a joint return, must report all income, regardless of the source, similar to federal tax filing. This is done using Form 140. Part-year residents must report all income earned while a resident of the state, along with any state-sourced income earned before or after their residency period. For non-residents, only income from Arizona sources is taxed, with prorated thresholds based on the proportion of Arizona gross income to federal adjusted gross income.
Ensuring Accurate Tax Filings
Consulting an expert CPA can help you keep a handle on different laws and tax implications.
Fusion CPA has a team of certified public accountants who are highly skilled in handling multi state taxes. We’re positioned to help you take the stress out of tax season, so you can focus on what really matters.
To see how we can help you with a proactive tax strategy to save you time and money, schedule A Discovery Call with one of our CPAs.
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