Problems with AZ tax

Forum|Forum|5 years ago
February 23, 2021
2 replies
36 views

We received an email from TurboTax saying our AZ return was rejected because of an issue with charitable deductions. It said for us to subtract the sum of line 5C and 6C from line 4C. All of those lines were $225, so subtracting them gave us a total of -$225. The next line, 7C, said that if the number was less than 0, enter 0. TurboTax did that, which was correct. The state said there was a problem with line 6C, which is Total Charitable Contributions made in 2020 for which you are claiming a credit under AZ law for the current (2020) or prior (2019) tax year. We made a total of $225 in charitable contributions last year, so I'm not sure what needs to be changed.

Lindy123

Level 2

I got an error message after running the "pre-check" before filing my returns, regarding a charitable donation I made that was eligible for an AZ tax credit. TurboTax had me go back to Federal, and deduct any charitable contributions eligible for an AZ tax credit, and instead, had me count that as an estimated tax payment to Arizona. This made sense to me. Why would I be allowed a Federal charitable deduction for something I'm getting an AZ tax credit on, (and since an estimated tax payment has the same effect as a tax credit). But after I followed Turbo Tax's instructions on this, and filed, AZ has now sent me a letter, because on my AZ tax form, there is a credit AND there is also an estimated tax payment, in the same amount, for my charitable gift. So unbeknownst to me, I had double-dipped! Must be a bug in the system.

BillM223

Level 15

"TurboTax had me go back to Federal, and deduct any charitable contributions eligible for an AZ tax credit, and instead, had me count that as an estimated tax payment to Arizona."

What do you mean by "TurboTax"? The software? Someone in this Community? An employee on the phone?

What you report makes no sense, so if indeed the software told you to do this, can you tell us:

1. Which platform (Online? CD/download?)

2. Which product?

3. Which charitable contribution?

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Diane_

Level 2

Hello, I'm new to forums, I hope I'm not doing the wrong thing by replying on someone else's question (if so, I apologize). I've been struggling with this for over 2 weeks now. Luckily I didn't think it looked right so I didn't file yet; I suppose my AZ return would have been rejected.

1) Platform & Product: Windows Desktop Home & Biz version, installed from CD (I applied all the online updates)

2) I have received the same information from multiple sources:

a) TurboTax Help: In the Arizona interview, on the page that says "Adjustment to State Income Tax Deduction", when you click the "Learn More" link, you get the following information (I only copied part of it here):

Safe Harbor - Guidance on Federal Itemized deduction taken as State Income Tax Deduction for Donations Made to Charitable Organizations

If you made a donation in exchange for a state tax credit and claimed itemize deductions on your Federal return, your Federal return charitable contribution deduction must be reduced as a result of receiving or expecting to receive this state tax credit. You may qualify for a safe harbor that allows you to treat some or all of the disallowed charitable contribution as a payment of state and local taxes. Remove any disallowed charity donation from your Federal Schedule A and enter your safe harbor amount as an estimate paid to Arizona on the Federal return. Return to this screen and enter the amount claimed as Arizona Estimate Tax Payments. If you do not claim the state tax credit for this donation, you may continue to claim the charitable deduction on your Federal and Arizona return. (there is more after this.....)

b) From this community, see these related posts:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/charitable-contributions-and-state-and-local-tax-credits/00/1015617/message-id/114006

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-sched-a-safe-harbor-for-charitable-contributions-in-xchange-for-tax-credit/01/2117116#M198694

My post explaining the question in way too much detail (nobody answered it yet):

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/irs-notice-2019-12-safe-harbor-regarding-state-tax-credits-how-much-to-enter-as-estimated-state-tax/01/2193684#M205259

c) From a TurboTax support person over the phone: I was told that since TurboTax didn't find any errors in my return, that it must be right and I should go ahead and file. I was unable to get the person to understand why I thought the system was allowing me to double-dip after one hour on the phone.

d) From IRS Publications/Notices:

https://www.irs.gov/newsroom/final-regulations-on-charitable-contributions-and-state-and-local-tax-credits

https://www.irs.gov/pub/irs-drop/n-19-12.pdf

https://www.federalregister.gov/documents/2019/06/13/2019-12418/contributions-in-exchange-for-state-or-local-tax-credits

3) AZ contributions taken as tax credits:

a) Donations made in Q1-2020 and taken as tax credits on my 2019 AZ return (AZ allows this): $400 for a qualified charitable organization (AZ form 321) and $500 for a qualified foster care organization (AZ form 352)

b) Donations made in 2020 and taken as tax credits on my 2020 AZ return: $400 for a qualified charitable organization (AZ form 321), $500 for a qualified foster care organization (AZ form 352), and $200 for a public school (AZ form 322)

4) Questions:

a) Which amounts should be entered as charitable contributions versus estimated tax payments on federal, then what adjustments need to be entered on the AZ form to avoid double dipping?

b) What needs to be done when part of the AZ tax credits were for 2019 and part were for 2020? (If I understand correctly, AZ forms say you have to make an adjustment on your 2020 return for tax credits paid in 2020 but claimed on your 2019 return, in addition to the adjustment for tax credits paid in 2020 and claimed on your 2020 return.)

If you can provide any guidance, I and others in my same situation will be very grateful!

QCOQU3STI0NS

Level 2

Where should the AZ Dollar for Dollar cash QCO donation be inserted? Listing it on the form with other donations as cash does not generate the credit which should be directly refunded.