Yes, this seems counter-intuitive. It would be easier to understand if this were a positive number, but as Arizona says "First, Arizona law states that residents are taxed on the same income they report for federal purposes, "
If you don't report this -$70,000 in the box where TurboTax is asking for the Arizona amount, then you will need to go back to the line where you are asked how much of the (positive) $70,000 income belongs to Arizona (assuming that it is a single income item) and enter -0- for the Arizona portion.
That is, if you reported the positive income as belonging to Arizona (even the excluded income) then you need to report the exclusion as belonging to Arizona.
I am sure that this is not the first time that the state authorities have seen this.
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