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After you file
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:
My post explaining the question in way too much detail (nobody answered it yet):
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/pub/irs-drop/n-19-12.pdf
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!
