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2021 Arizona Electronic Filing & Payment Requirements

The new year brings some new rules for Arizona taxpayers. If you and/or your business are subject to tax in Arizona, please be mindful of these new rules that may impact your tax responsibilities:

If your business is subject to Arizona’s corporate or partnership income tax, effective January 1, 2021, corporations and partnerships are required to electronically file their Arizona income tax returns.  Additionally, if your corporation had at least $500 in tax liability in the prior year, then also effective January 1, 2021, the corporation’s estimated corporate tax payments are required to be paid electronically.

If your business is subject to Arizona’s Transaction Privilege Tax (“TPT”), then effective January 1, 2021, your business will be required to electronically file and pay its TPT if your business had at least a $500 TPT liability (on annual basis) in the prior year.  Please note that this is a reduction from the previous threshold amount of $5,000 – so your business may not have had an electronic filing/payment requirement in the past, but may have one as of 2021 based on the reduced threshold amount.  In an effort to reduce spending and encourage electronic filings, the Department of Revenue (“DOR”) will discontinue mass mailings of blank TPT paper returns to taxpayers as of February 1, 2021. Instead, taxpayers (even if not required) are encouraged to file and pay online. If your business qualifies for paper filing, then you can download a paper return from the DOR’s website.

The new year also brings changes to Arizona’s withholding tax filing requirements. Effective January 1, 2021, businesses with average quarterly withholding tax liability of at least $125 are required to file and pay their withholding electronically, and employers can start electronically filing their wages reports (W-2, W-2C, W-2G, 1099-DIV, 1099-R and 1099-MISC).

Failure to file or pay electronically when required may result in penalties being assessed by the state.  The Arizona failure to file electronically and failure to pay electronically penalties are 5% each, with a minimum of $25 each. Depending on the tax liability at issue, the penalties can be significant.

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