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Individual & Corporate Income Tax

Individual Income Tax Frequently Asked Questions

 

Frequently Asked Questions Alabama Individual Income Tax

The following are frequently asked questions concerning the Alabama individual income tax laws.  The answers for these questions and many others can be found in the downloadable versions of the Form 40, Form 40A, and Form 40NR booklets available on this web site.

  • Is Alabama following the Federal in allowing the the bonus depreciation and the additional Section 179 expense provisions of the federal Economic Stimulus Act of 2008 on the Alabama return?

    No. Act Number 2008-549, passed by the Alabama Legislature during the first 2008 Special Session, decoupled Alabama income tax laws from the bonus depreciation and the additional Section 179 expense provisions of the Federal Economic Stimulus Act of 2008. The amount of bonus depreciation and the additional Section 179 expense deduction claimed on the federal return (as allowed by the Federal Economic Stimulus Action of 2008) must be added back.

  • Schedule C - Attach an explanation and show the Bonus Depreciation adjustment as “Other Expenses” on Federal Schedule C. The net profit or (loss) from the Federal Schedules C with adjustments should be entered on Page 2, Part I, Line 2a for Form 40 and Page 2, Part I, Line 4a for Form 40NR. The Federal Economic Stimulus Act of 2008 “Bonus Depreciation” for the Schedule C should also be entered on Part I, Line 2b for Form 40 and Page 2, Part I, Line 4b for Form 40NR. This line is for informational purposes only. THE ADJUSTMENT IS MADE ON THE FEDERAL SCHEDULE. Please make sure that you make an adjustment for the difference between the amount of regular MACRS deductions for the same qualifying property and the amount of Alabama-allowed depreciation for the same qualifying property.

    Schedule E (Income from Rental Real Estate & Royalties) - Alabama law has no provision to allow a deduction for the bonus depreciation allowed by the Federal Economic Stimulus Act of 2008. Do not include the amount of the bonus depreciation on Part I, Line 20.

    Schedule E (Income from Partnerships, S-Corporations, Estates & Trusts) - If you received a K-1 from a partnership, S corporation, estate or trust you must add back to you income or loss from that entity any bonus depreciation attributable to the Federal Economic Stimulus Act of 2008 deducted by that entity. You should contact the entity that provided you the K-1 to obtain this information.

    Schedule F - Attach an explanation and show the Bonus Depreciation adjustment as “Other Expenses” on Federal Schedule F. The net profit or (loss) from the Federal Schedules F with adjustments should be entered on Page 2, Part I, Line 7a for Forms 40 and 40NR. The Federal Economic Stimulus Act of 2008 “Bonus Depreciation” for the Schedule F should also be entered on Page 2, Part I, Line 7b for Forms 40 and 40NR. These lines are for informational purposes only. THE ADJUSTMENT IS MADE ON THE FEDERAL SCHEDULE. Please make sure that you make an adjustment for the difference between the amount of regular MACRS deductions for the same qualifying property and the amount of Alabama-allowed depreciation for the same qualifying property.

 

  • How should the deduction for self-employment tax be treated with the change in the method for computing the Federal Income Tax Deduction?

    The self-employment tax must be deducted as an itemized deduction on the cash basis.  The Department's position has been that the self-employment tax is considered paid when the federal tax return is completed and filed, whether the monies used to pay it came from estimated payments, withholding or money paid with the return.  When the tax return is completed and filed the taxpayer is able to determine how much of his estimate and/or withholding is used to pay federal income tax and how much is used to pay self-employment tax, and not until then.

    As an example:  A taxpayer pays $15,000 in estimated tax for 2001.  When the 2000 return is filed in 2001 the taxpayer owes $5,000 in income tax and $9,180 in self-employment tax.  His Federal Income Tax (FIT) deduction for 2000 would be his $15,000 estimated tax payments.  Any 1999 refunds received in 2000 or 1999 payments made in 2000 would be reported on the appropriate lines.  We are also assuming that there were no other refunds or liabilities received or paid in 2000.

    On his 2001 return, considering that 2001 is the transition year to the accrual basis of deducting FIT, the taxpayer would report a $10,000 (9180 + 820) FIT refund and take a $9180 itemized deduction for self-employment tax on Schedule A.  He would deduct his 2001 Federal income tax liability on the appropriate line.  At the time the federal return is filed the amount of self-employment tax will have been determined and that amount would be deductible on the 2002 return as an itemized deduction, just as in prior years.

    The taxpayer would not lose any self-employment tax deduction for any year.  

  • When will I get my refund?

    That depends upon several things:  Whether or not you filed electronically, how early in the tax season you filed, etc.  To get your refund faster file early or file electronically.

    To check on the status of your refund, wait at least six weeks after filing your return, then go to https://myalabamataxes.alabama.gov/.

  • When must I file my Alabama individual income tax return?

    Your 2012 Alabama individual income tax return is due April 15, 2013.  

  • Does Alabama accept the federal extension of time for filing form?

    No. If you know you cannot file your return by the due date, you do not need to file for an extension. You will automatically be granted an extension until October 15, 2013. If you anticipate that you will owe additional tax on your return you should submit your payment with a payment voucher (Form 40V) by April 15, 2013. Except in cases where taxpayers are abroad, no extension will be granted for more than 6 months. An extension means only that you will not be assessed a penalty for filing your return after the due date. Interest on the additional tax due from the due date of the return and any penalties will be assessed if applicable to your return..

 

  •   Can I pay my income taxes due by ACH Debit?

    Yes. You may pay by ACH Debit by going to revenue.alabama.gov/efiling.htm. You will need to have your bank routing number and checking account number to use this service. No fee is charged for this service. If you are paying with funds on a foreign bank, you must include an additional $25 exchange fee. Do not use Form 40V when paying by ACH Debit.

 

  •   Can I pay my income taxes due with a credit card?

    Yes. If you file and have a balance due, the amount owed can be charged to your American Express, Visa, Discover/Novus, or MasterCard by using Official Payments Corporation, Link 2 Gov or Value Payment Systems. Value Payment Systems does not accept American Express but has a program called BillMeLater. You can pay by calling 1-800-2PAY-TAX (Official Payments Corporation, Alabama’s Jurisdiction Code is 1100) or 1-866-9PAY-TAX (Link2Gov). You can also pay over the Internet by visiting www.officialpayments.com (Official Payments Corporation), www.ALTaxPayment.com (Link2Gov) or www.payaltax.com (Value Payment Systems). There is a convenience fee for this service. The fee is based on the amount of your tax payment and is paid directly to Official Payments Corporation, Link2Gov or Value Payment Systems. Do not include Form 40V with your return when you pay your taxes by credit card.

 

  •   Can I pay my income taxes due by E-check?

    Yes. If you file and have a balance due, you can pay your taxes due electronically from your bank account online at https:// www. officialpayments. com/ echeck/ec_template_standard.jsp. Enter Jurisdiction Code1100. You will need to have your bank routing number and your checking account number to use this service. There is no fee for this service. Do not include Form 40V with your return when you pay your taxes by credit card.

 

  •   Who must file an Alabama individual income tax return?

    Full year residents whose filing status is "Single" must file if gross income for the year is at least $4,000. Full year residents whose filing status is "Married Filing Separate Return" must file if gross income for the year is at least $5,250.  Full year residents whose filing status is Head of Family" must file if gross income for the year is at least $7,700.  Those whose filing status is "Married Filing Joint Return" and whose gross income for the year is at least $10,500 must file an Alabama income tax return.

    Part year residents whose filing status is "Single" must file if gross income for the year is at least $4,000 while an Alabama resident.  Full year residents whose filing status is "Married Filing Separate Return" must file if gross income for the year is at least $5,250 while an Alabama resident.   Full year residents whose filing status is Head of Family" must file if gross income for the year is at least $7,700 while an Alabama resident.   Those whose filing status is "Married Filing Joint Return" and whose gross income for the year is at least $10,500 must file an Alabama income tax return while an Alabama resident.

    Nonresidents must file a return if Alabama income exceeds the allowable prorated personal exemption.

 

  •   What filing status should I use to file my return?

    There are four different filing statuses available under Alabama law:

     1. Single  2. Married Filing a Joint Return  3. Married Filing a Separate Return  4. Head of Family

    Explanation of the filing statuses

 

  •   To what personal exemptions am I entitled?  

    Taxpayers using the Single and Married Filing Separately filing statuses are entitled to a $1,500 personal exemption.  Taxpayers using the Married Filing Jointly and Head of Family filing statuses are entitled to a $3,000 personal exemption.

    Part year residents are entitled to the full exemption amount.  A dependent or student may claim a personal exemption even if claimed by someone else.  

 

  •   Would a foster child qualify as a dependent?

    You cannot claim a foster child, friend, cousin, yourself, or your spouse as a dependent on your Alabama income tax return.  

 

  •   Is the "Head of Family" filing status in Alabama the same as the "Head of Household" filing status for federal purposes?

    Yes, with a few exceptions.  In Alabama, a foster child does not qualify a taxpayer to claim "Head of Family".  Also, you must be unmarried in order to qualify for "Head of Family" filing status with the state.

 

  •   How much is the Alabama standard deduction?

    The Alabama standard deduction is based on the filing status used by the taxpayer. For tax years ending 12/31/2007 and forward, the standard deduction chart is used to determine the Standard Deduction allowable on your return.

    For tax years ending 12/31/2006 and prior, the standard deduction for taxpayers using the Single filing status, the Married Filing Separately filing status and the Head of Family filing status is the lesser of 20% of adjusted gross income or $2,000.

    The standard deduction for taxpayers using the Married Filing Jointly filing status is the lesser of 20% of adjusted gross income or $4,000.  

 

  •    If I itemize on my federal tax return, do I have to itemize on my state return?

    No.  

 

  •   What are Alabama's individual income tax rates?

    For single persons, heads of families, and married persons filing separate returns:

     2%    First $500 of taxable income  4%    Next $2,500 of taxable income  5%    All taxable income over $3,000

    For married persons filing a joint return:

     2%    First $1,000 of taxable income  4%    Next $5,000 of taxable income  5%    All taxable income over $6,000  

 

  •   What interest income is exempt from Alabama taxation?

    Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama, and interest on obligations of the United States or any of its possessions.  

 

  •   Can I deduct child care expenses on my Alabama income tax return?

    No, nor does Alabama have a child care tax credit.

 

  •   I am in the military and a legal resident of Alabama but I do not live in Alabama.  Do I have to pay Alabama income tax?

    Military personnel who list Alabama as their home of record are required to pay Alabama income tax regardless of where they are assigned or the length of time spent in Alabama. Alabama income tax law does not exempt active duty military.

 

  •   I am in the military and not a legal resident of Alabama.   If I and/or my spouse also have civilian jobs in Alabama, must we report that income to Alabama?

    Yes, on Form 40NR, a copy of which is available on this web site.  

 

  •   Must I report the sale of my personal residence?

    If your personal residence was sold prior to 1998, you would be required to report the sale of your home on federal Form 2119.

    Because Alabama law is now the same as federal law in this area, the treatment of 1998 Alabama tax returns, and forward, will be the same as for your federal return. 

 

  •   What are the limitations on my IRA deduction?

    Contributions:  Contributions to an individual retirement arrangement (IRA) may be taken as an adjustment to income, the same as for federal tax purposes. These deductible contributions represent a deferral of tax on a portion of your income.

    Distributions:  At the time funds are distributed from these IRA accounts, the amount on which tax has been deferred cannot be claimed as part of the cost basis in the fund.

    Since Alabama income tax law prior to 1982 did not conform to federal tax law in this area, you may have a cost basis in the fund for amounts contributed prior to 1982.

    Roth IRA:  Alabama recognizes Roth IRA's.   

 

  •   If I file using the Married Filing Jointly filing status on my federal return, do I have to file a joint Alabama return?

    No, you can use the Married Filing Separately filing status.

 

  •   Should I itemize my deductions or should I use the standard deduction?

    You may use either method.  Compute your deduction using both methods and compare the results. Base your deduction on the method resulting in the greatest advantage to you.  

  •   Can I have my Alabama individual income tax return filed electronically?

    Probably.  Check with your Authorized IRS E-file Provider to determine if this option is available to you!  Almost any return that can be filed electronically for the IRS can also be filed electronically for Alabama.

    More on the Alabama Electronic Filing Program

 

  •   Can I file electronically my Alabama individual income tax return from my home using my personal computer?

    Yes.  More on PC Online Filing.  

 

  •   Do you have a TTY number for the hearing impaired?

    Yes.  Our TTY number is (334) 242-3061.  

 

  •   My employer went out of business/or will not give me a W-2 form.  What can I do?

    Submit a copy of the complete federal Form 4852 (Substitute W-2) and attach it to your Alabama return with copies of your pay stubs and/or leave and earnings slips.  

 

  •   What should I do if my Form W-2 is incorrect?

    You should secure a corrected withholding statement (Form W-2C) from your employer.

 

  •    Will you fax Alabama tax forms to me?

    No.  We are happy to mail or ship to you as many forms as you need.  Please phone or fax your request to your nearest Taxpayer Service Center.  For bulk orders, you can use can order Individual Income Tax forms online.   Also, most of the Alabama individual income tax forms are available in downloadable form on this web site.

 

  •   What if I have any other questions about my Alabama individual income tax return?

    You have several available resources for assistance:

     - Specific instructions for all three of Alabama's income tax returns are available on this web site or in print.

     - Submit your questions via e-mail at Contact Us.

     - The Alabama Taxpayer Service Center nearest you.  Phone and fax numbers are listed on this web site.