Ariz. Admin. Code § 15-2C-101

Current through Register Vol. 30, No. 25, June 21, 2024

Section R15-2C-101 - Payment of Estimated Income Tax by Individuals

A. Individual taxpayers subject to Arizona income tax who reasonably expect to have Arizona gross income of more than $75,000.00 in the current tax year or had Arizona gross income of more than $75,000.00 in the preceding tax year are subject to the provisions in this rule. For tax years ending on or before 12/31/92, the requirement to make estimated payments is based on Arizona gross income of more than $100,000.00.

1. The requirement to make estimated tax payments is based on the Arizona gross income of each individual taxpayer.

2. All taxpayers, whether classified as a nonresident or a resident, shall be subject to the estimated payment requirements.

3. Nonresidents shall use the definition of Arizona gross income pursuant to A.R.S. § 43-1091 for purposes of determining if estimated tax payments are required.

4. Individual taxpayers, moving into or out of Arizona during a tax year resulting in a change of residency status, shall use the definition of Arizona gross income in A.R.S. § 43-1001, allocated pursuant to A.R.S. § 43-1097, for purposes of determining if estimated tax payments are required for the portion of the year in which they are Arizona residents.

B. In projecting current Arizona gross income, the taxpayer shall use ordinary business care and prudence in determining if Arizona estimated tax payments are required.

1. The reasonableness of the projection of Arizona gross income shall depend on the facts of each case and the burden of proof rests on the taxpayer to substantiate that penalty and interest shall not be imposed for non-payment, late payment, or underpayment of estimated tax.

2. The taxpayer may request a waiver from the requirement to make estimated payments for 1 or more payment periods in the current year by attaching a written statement to the individual's income tax return for that year.

a. The waiver is available only if the individual taxpayer did not have Arizona gross income over $75,000.00 in the preceding tax year and cannot reasonably project that Arizona gross income for the current year exceeds $75,000.00. ($100,000.00 for tax years ending on or before 12/31/92).

b. The statement shall include the reason why Arizona gross income could not have reasonably been projected for 1 or more payment periods during the current tax year.

C. Other than as provided in subsection (D), Arizona estimated tax payments shall be paid in 4 equal installments on or before due dates established by the Internal Revenue Code.

1. For purposes of this rule, Arizona withholding shall be considered an estimated payment which is paid equally on each due date, unless the taxpayer establishes otherwise.

2. The sum of Arizona estimated tax payments, when combined with the taxpayer's Arizona withholding for the current year, shall equal the lesser of:

a. At least 90% of the Arizona tax liability for the current year; or

b. 100% of the Arizona tax liability, as shown on the personal income tax return for the preceding taxable year. This clause shall apply only if the individual is required to file and does file an Arizona personal income tax return for the preceding taxable year pursuant to the provisions under A.R.S. § 43-301.

D. Those taxpayers qualifying under the following circumstances may make Arizona estimated tax payments in other than 4 equal installments.

1. There shall be no requirement to make the 4th estimated tax payment if the taxpayer files an Arizona tax return, covering a calendar year, on or before January 31 of the year following the tax year or, for a fiscal year taxpayer, on or before the last day of the month following the close of the fiscal year, and the taxpayer pays in full the amount stated on the return as payable.

2. An individual who reports as a farmer or fisherman on the federal income tax return is only required to make 1 installment for a taxable year. The due date for such installment shall be January 15th of the year following a calendar tax year or the 15th day of the 1st month after the end of a fiscal year. There shall be no requirement to make this payment if, on or before March 1 of the year following a calendar tax year or on or before the 1st day of the 3rd month after the end of a fiscal year, the taxpayer files an Arizona income tax return for the tax year and pays in full the amount stated on the return as payable.

3. An individual who elects to be treated as a nonresident alien on the federal income tax return may make 3 estimated payments.

a. Payment shall be made on or before due dates established by the Internal Revenue Code.

b. The amount of the 1st required payment shall be 50% of the total estimated tax liability for the tax year. The 2nd and 3rd payments shall each be 25% of the total estimated tax liability.

4. A taxpayer may be able to reduce the amount of 1 or more required installments if income is not received evenly throughout the tax year. A taxpayer who uses the annualization method for determining the amount of the required installments on the federal individual income tax return may also use the annualization method on the Arizona personal income tax return. A taxpayer electing to use the annualization method for Arizona purposes shall use the method as delineated on the Arizona return and in the accompanying instructions. If the taxpayer elects to use the annualization method for 1 due date in a tax year, the taxpayer shall use that method for all due dates for that tax year.

5. A taxpayer, due to the provisions in subsection (B) of this rule, may not be required to make 4 equal payments of estimated tax. Such a taxpayer shall be liable for the payment of estimated tax beginning no later than the 1st due date after the taxpayer establishes that the Arizona gross income requirement is applicable.

a. If the taxpayer is 1st liable for the payment of estimated tax beginning in the 2nd payment period, such payment shall equal 50% of the total liability for the current tax year. If the liability occurs in the 3rd payment period, such payment shall equal 75% of the total liability for the current tax year. Subsequent payments shall equal 25% each.

b. The total of these payments shall equal the amount pursuant to subsection (C) of this rule.

E. Effective 7/17/93, a penalty shall be assessed on the underpayment amount for each payment period pursuant to A.R.S. § 42-136(O). The underpayment amount is the difference between the estimated payment required to be made and the estimated payment actually paid. Penalty and interest shall be assessed for each underpayment amount for the number of days that amount remains unpaid.

1. For the purpose of computing penalty and interest, a payment shall be applied to the quarter designated by the taxpayer regardless of any outstanding underpayment balance on an earlier installment. Any overpayment of the quarterly amount shall be applied to outstanding estimated payment balances, beginning with the oldest outstanding balance, unless otherwise designated by the taxpayer.

2. Penalty and interest, on late payment, non-payment or underpayment amounts of estimated tax, shall stop accruing at the earlier of the date of payment of the underpaid amount or of the original due date of the income tax return for the tax year in which the estimated payment is required.

F. Payments of estimated tax shall be made by check, cashier's check, certified check, money order, U.S. currency, or by the application of an overpayment from a prior tax return.

Ariz. Admin. Code § R15-2C-101

Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).