topic Re: Arkansas State Tax Return Software Error in State tax filing

Arkansas State Tax Return Software Error

pnm — Thu, 25 Mar 2021 15:10:15 GMT

There is a software error in how the state income tax return is filed in regard to pensions and qualified IRAs for 2020. Lines 18a and 18b on AR Form AR1000F are for entering husband and wife income from pensions or IRAs. There is a box for entering the gross distribution and the taxable amount. Arkansas law gives a $6000 credit, so the taxable amount should be $6000 less than the gross amount. However, Turbo Tax completed the form by inserting the gross amount as the taxable amount. Turbo Tax got this right on my 2019 return.

Re: Arkansas State Tax Return Software Error

BillM223 — Fri, 26 Mar 2021 02:48:13 GMT

Did you have a military pension? In Arkansas, you can choose to exclude the entire military pension, or you can choose to add the military pension to other pensions and take the $6,000 exclusion.

Also, did you check that you would take the "65 Special" credit of $26 on line 7A? If you did, then you do not get the $6,000 pension exclusion.

For background, see the AR1000F instructions on page 11, line 7a, and page 12, lines 17-18.

Also see this answer for another taxpayer:

A taxpayer can choose to take the exclusion for all the military retirement benefit, or waive that and add the military retirement benefit to the other retirement benefits and apply the $6,000 exclusion. You cannot exclude the total military retirement benefit AND take the $6,000 exemption.

This is laid out in an opinion issued by the Arkansas Department of Finance and Administration (https://www.ark.org/dfa-act896/index.php/api/document/download/20180814.pdf) The opinion is full of legalese, but the salient line is

"A taxpayer claiming an exemption under subsection (e) of this section is not eligible for an exemption under subsection (a) of this section."

Subsection (e) refers to the total exemption of military retirement benefits; subsection (a) refers to $6,000 exclusion.

Re: Arkansas State Tax Return Software Error

lesihara — Wed, 14 Apr 2021 18:58:26 GMT

Hawaii also doesn't tax military pay.

Re: Arkansas State Tax Return Software Error

BillM223 — Wed, 14 Apr 2021 19:23:21 GMT

@lesihara

Did you have a question about Hawaii?

Re: Arkansas State Tax Return Software Error

C130Visual — Mon, 10 May 2021 01:47:45 GMT

I have the same problem with Arkansas line18a and 18b. The "less $6000" was not applied in both cases. I think this is wrong!

My wife and I are both over 65. Selecting and not selecting the "65 Special" changes nothing. Neither of us are military.