Funny I'm just now seeing this even though I live in AR (but not Texarkana). AR's "Border City Exemption" (an AR state law, not an "agreement"; TX has no state income tax) exempts (a) ALL income (regardless of source) of Texarkana, AR residents, and (b) wage or business income earned in Texarkana, AR by Texarkana, TX residents. (Only street addresses within the city limits of Texarkana, AR or TX qualify.) Form AR-TX is issued with W-2's to employees residing in either Texarkana to document this exemption; it is filed with your AR return.
TurboTax Arkansas will pick up your AR-taxable income as usual, but it then asks if you lived in Texarkana during the year. If so, it will walk you thru the steps to deduct exempt income, including any information from Forms AR-TX.
@billra is exempt from AR income tax, but must still file a return to claim the exemption. His retirement plan probably won't send him a Form AR-TX, but as long as his AR return has a Texarkana, AR street address he should be OK.
@Annopter : It depends on whether or not you actually worked in AR. If you only received your W-2 in AR but didn't work *or* live there, contact the Arkansas Department of Finance and Administration for assistance. If you did work in AR while a resident of Humble, TX (*not* Texarkana, AR or TX), that income is subject to AR non-resident tax.
