How to File Your Arizona Tax Return for 2021: A Step-by-Step Guide

For the 2021 tax year, Arizona residents and certain nonresidents must file a tax return with the Arizona Department of Revenue. This obligation applies to individuals, families, sole proprietors, gig workers, and small business owners who meet the state’s income thresholds or have Arizona-source income. Understanding your filing requirements is essential to complying with state tax law and avoiding unnecessary penalties.

Several updates affected the 2021 filing season. These include the introduction of a Small Business Income (SBI) tax election, expanded deductions for contributions to 529 and ABLE accounts, and the implementation of a Proposition 208 surcharge for high-income taxpayers. Additionally, Arizona’s position on federal tax conformity may impact how certain income or deductions are reported. These changes are particularly relevant for individuals with complex income sources or those claiming specific credits or adjustments.

This step-by-step guide is designed to clarify the filing process for the 2021 tax year. It includes a detailed overview of who must file, what forms to use, recent tax law changes, and how to complete and submit your return. Whether filing for the first time or navigating updated requirements, the following sections will help you complete your Arizona tax return accurately and on time.

Who Needs to File an Arizona Tax Return for 2021

Most people who lived in Arizona or earned income from Arizona sources in 2021 must file a tax return for state income. Filing requirements depend on income level, residency status, and type of income received. Below is a breakdown of who must file, according to the Arizona Department of Revenue guidance.

1. Arizona Residents

Individuals who were full-year residents of Arizona in 2021 are required to file a state income tax return if their gross income surpasses the specified thresholds.

• Single filers must file if their annual gross income was $12,550.
• Married couples filing jointly must file if their combined gross income was $25,100.
• Married individuals filing separately must file if each earned $12,550 or more.
• Heads of household must file if their gross income reaches $18,800 or more.

These thresholds align with the standard deduction amounts used on the federal return for the same tax year.

2. Part-Year Residents and Nonresidents

Individuals who relocated to or from Arizona in 2021 or earned income from the state while residing in another location may still be required to file a tax return.

• Part-year residents must use Form 140PY to report income earned in Arizona.
• Nonresidents who earned Arizona-source income must use Form 140NR.

3. Small Business Owners and Gig Workers

Self-employed individuals who operate a small business or generate income through contract work or gig platforms, such as rideshare or delivery applications, must file if their income surpasses the specified standard thresholds.

• Those who opt into Arizona’s Small Business Income (SBI) Tax must also file a separate SBI return.

4. Dependents and Students

Even if someone else claims you as a dependent, you may still need to file an Arizona return if:

• You earned wages, self-employment income, or investment income that exceeded the minimum filing threshold.
• You had Arizona state tax withheld from your income and now wish to claim a refund.

5. Retirees and Military Members

Retirees must file if they receive taxable pensions, annuities, or other income above the filing threshold.

• Active-duty military pay is generally exempt for Arizona residents but must be reported.
• Depending on the income type, certain veterans' benefits may be eligible for subtractions.

Key Dates and Deadlines for the 2021 Tax Year 

Filing your Arizona tax return on time is essential to avoid penalties and interest. For the 2021 tax year, the Arizona Department of Revenue set the standard filing deadline as April 18, 2022, due to a federal holiday delay. If you could not file by that date, you could request an automatic extension, which moved the due date to October 17, 2022. It is important to note that while an extension grants more time to file, it does not extend the deadline for paying any taxes owed.

Important Deadlines and Payment Reminders

• April 18, 2022 – This was the final date to file your Arizona return and make tax payments without incurring late penalties.
• October 17, 2022 – This was the deadline for those who received a filing extension. However, you were still expected to pay at least 90% of your tax liability by April 18 to avoid late payment penalties.

Taxpayers should review the security of their connection before submitting returns electronically, especially when using the public or shared internet.

What Happens If You Miss a Deadline?

Failing to file or pay on time can result in penalties. Arizona imposes:

• A late filing penalty of 4.5% per month, up to a 25% maximum.
• A late payment penalty of 0.5% per month, up to 10%.
• Interest accrues daily on unpaid tax balances.

To avoid enforcement actions, it is critical to verify that you are human before submitting online documents and ensure that your session remains secure. The department uses systems like Ray ID and performance security monitoring to protect taxpayer data.

Suppose the Arizona Department of Revenue needs to review your submission due to mismatched data or unsigned forms. In that case, it may issue a notice requesting you to respond within a specific time frame. Always review any letter carefully before completing the action required.

While most returns are processed quickly, some are delayed for additional verification. In these cases, messages like “verification successful, waiting” or instructions confirming your secure connection may occur. You may also be prompted to verify you’re human by completing a visual verification step.

Even if your return shows no balance due, you must file if you meet income thresholds. Completing your return on time helps maintain compliance and prevents avoidable issues with your tax return.

2021 Arizona Tax Law Updates and Deductions 

Taxpayers filing an Arizona income tax return for 2021 should be aware of several law changes that may affect deductions, credits, and tax liability. These updates reflect adjustments related to federal conformity, voter-approved propositions, and deductions for savings and education contributions.

Federal Conformity and Adjustment Impacts

At the time of form release, the Arizona Department of Revenue had not complied with federal tax law changes made after March 11, 2021. As a result, taxpayers were permitted to file returns under the assumption that conformity would eventually occur. However, the law may require amended filings once complete alignment is enacted. Before proceeding with your return, verify whether additional state-specific adjustments are necessary due to federal discrepancies.

Proposition 208 and High-Income Surcharge

In 2021, Arizona implemented a 3.5% surcharge for high earners under Proposition 208. This applies to individuals with taxable income over $250,000 (single) or $500,000 (joint). The surcharge is calculated separately and added to your total income tax owed.

Small Business Income Tax Election

A new elective tax rate of 3.5% became available for small business income separately reported on Form 140-SBI. This rate allows business owners to pay tax on qualifying income outside their regular personal income tax, helping reduce the impact of the Proposition 208 surcharge. Income must be directly owned by the individual and reported on the appropriate federal schedules to qualify for this election.

Expanded Deductions for Education and Disability Savings

Arizona allows subtractions for contributions to:

• 529 Plans: Up to $2,000 per beneficiary for individuals or $4,000 for married couples filing jointly.
• 529A ABLE Accounts: Contributions to Achieving a Better Life Experience (ABLE) accounts are eligible for the same limits and provide tax benefits for individuals with disabilities.

These subtractions reduce Arizona taxable income and encourage long-term savings. Remember to retain proof of contributions in case of audit or verification requests.

Choosing the Right Arizona State Tax Forms 

Selecting Arizona's tax form in 2021 is essential to avoid filing errors or delays. The form you need depends on your residency status, income level, deductions, and eligibility for specific credits.

Main Resident Forms

• Form 140EZ: Designed for full-year residents with simple tax situations. You must have Arizona taxable income under $50,000 and claim only basic credits like the family income tax credit.
• Form 140A: This short form applies to full-year residents but allows for slightly more flexibility than 140EZ. You must not be itemizing deductions or making complex adjustments.
• Form 140: Required for residents with more complex tax profiles. You must use this form if your Arizona taxable income exceeds $50,000, you itemize deductions, claim multiple credits, or need to report estimated payments.

Additional Forms

• Form 140PY: Required for part-year residents who lived in Arizona for only a portion of 2021.
• Form 204: Used to request an extension for the file.
• Form 140X: This variant is for submitting an amended return if your original filing needs correction.
• Forms 301–323: Used to claim specific nonrefundable or refundable tax credits.
• Form AZ-140V: Attach this payment voucher when sending a check or money order by mail.

When using online filing systems, ensure the security of your connection is stable. This measure is standard for maintaining portal integrity when prompted to verify that you are human. Complete the check to establish a trusted connection before proceeding with form submission or payment. Taking these precautions helps protect your data during the filing process.

Step-by-Step Guide to Completing Your Arizona Tax Return 

Filing your Arizona tax return correctly requires careful documentation, accurate calculations, and knowledge of state-specific adjustments. Below is a step-by-step guide designed to walk you through the process clearly and precisely.

Step 1 – Gather Required Documents

Before completing your Arizona tax return, it is essential to prepare all required documentation. The following list outlines the documents you will need and why each is necessary:

• Your completed federal tax return is required because Arizona tax calculations begin with your federal adjusted gross income.
• W-2 forms from all employers must be included to verify your wage income and state withholding.
• One thousand ninety-nine forms for interest, dividends, retirement, or freelance work are used to report additional income that may be taxable in Arizona.
• Receipts or records of deductible expenses, such as mortgage interest, charitable contributions, or medical costs, are necessary to itemize deductions rather than take the standard deduction.
• A copy of your prior-year Arizona tax return can ensure consistency and carry forward any relevant tax credits or data.
• Your bank account and routing numbers should be double-checked if you request a direct refund deposit or plan to pay electronically.

Having these documents ready before filing will help you avoid delays, minimize errors, and ensure your return is complete and accurate.

Step 2 – Calculate Arizona Adjusted Gross Income

Your Arizona return begins with your federal adjusted gross income (AGI), which you’ll transfer from your IRS Form 1040. From there, you’ll apply Arizona-specific adjustments. These adjustments ensure that only income taxed under Arizona law is included.

• Common additions may include interest from non-Arizona municipal bonds or depreciation adjustments.
• Common subtractions include Social Security income, U.S. government bond interest, and qualified military pay.

These additions and subtractions result in your Arizona adjusted gross income. If the Arizona Department of Revenue needs to review your return for accuracy, respond promptly to any requests. This step is key to calculating your final taxable income correctly.

Step 4 – Apply Credits and Payments 

After computing your base tax liability, apply any eligible tax credits. Arizona offers a variety of credits, including those for charitable contributions, school tuition organizations, and property taxes. Use Forms 301–323 to claim them, depending on the type of credit.

Next, subtract any tax payments you’ve already made. This includes withholding reports on W-2s and 1099s, estimated fees, and carryover credits. If you’re a small business owner who filed a separate Small Business Income Tax return, include payments to that account.

The final figure will show if you still owe tax or are due a refund. If you anticipate a refund, ensure that your bank account details are correct for direct deposit. To avoid fines or notifications from the Arizona Department of Revenue, make arrangements to pay by the due date if you owe money.

Step 5 – Check for Errors and Prepare to File 

Before you file your Arizona tax return, carefully review all parts of your documents to avoid costly mistakes. Use the list below to guide your final review:

• Verify personal information: Make sure your name, Social Security number, and address are correct. If filing jointly, double-check your spouse’s details and signature.
• Review your math: Ensure all calculations are accurate, especially your taxable income, credits, and refund or amount due.
• Confirm your tax form selections: Check that you used the appropriate form (140EZ, 140A, or 140) and attached all necessary schedules and credit forms.
• Ensure banking details are correct: Confirm that your bank account and routing numbers are accurate and legible for direct deposit.
• Attach all required documents: Include W-2s, 1099s, payment vouchers, and any additional documents that support your return.
• Retain copies for your records: Save a full copy of your signed return and all attachments in case of audits or amendments.

How to File Your Arizona State Tax Return 

Arizona residents and small business owners can file their 2021 tax returns electronically or by mail. The Arizona Department of Revenue recommends e-filing whenever possible due to faster processing times, fewer errors, and instant confirmation.

E-File Options:

• You may file directly through AZTaxes.gov, the official state tax portal supporting individual and small business returns.
• The state of Arizona also authorizes several commercial tax software programs to file returns.
• Taxpayers with specific income qualifications may be eligible for Free File options. Always verify eligibility before proceeding.

Paper Filing Instructions:

If you prefer to file a paper return, use the correct address based on whether you owe taxes or expect a refund. Include the appropriate form (140, 140A, or 140EZ), along with all schedules, W-2s, and 1099s.

When mailing, follow the assembly order outlined in the official instructions to ensure your return is processed without delay. Attach a check or money order (if applicable) and use the correct envelope.

Before mailing or submitting your return online, confirm all fields are complete and your signature is included. Filing on time helps avoid penalties and ensures your refund is not delayed.

How to Pay Your Arizona Taxes 

If you owe taxes for 2021, the Arizona Department of Revenue offers several secure payment options to help you pay on time. Paying by April 18, 2022, is crucial to avoid penalties and interest.

Online Payment Methods
Taxpayers can pay electronically through AZTaxes.gov. Options include:

• Electronic check (ACH): No service fee is charged for direct bank withdrawals.
• Debit or credit card: Service fees may apply and are disclosed before transaction completion.
• You may schedule payments in advance and receive immediate confirmation of submission.

Mailing a Payment 

If you choose to file a paper return or prefer to send your tax payment by mail, follow these steps carefully to ensure proper processing:

• Include Form AZ-140V (Individual Income Tax Payment Voucher) with your check or money order. This form helps the Arizona Department of Revenue apply your payment to the correct tax account.
• Make your check or money order payable to the Arizona Department of Revenue. Do not send cash through the mail.
• Write your Social Security number and “Tax Year 2021” clearly on the memo line of your check. This ensures that your payment is correctly linked to your return.
• Use the correct mailing address listed in the official Form 140 instruction booklet. The address will vary depending on whether you owe a balance or submit a return without payment.

By carefully preparing and mailing your payment with the required details, you help avoid delays or misapplied funds. Always retain a copy of your payment and voucher for your records.

Installment Plans
If you cannot pay the full amount due, wait until the Department of Revenue processes your return. Then request a payment plan online or by responding to your billing notice.

How to Track Your Arizona Refund or Balance Due 

Once you file your Arizona tax return, you can track your refund or check your balance using tools provided by the Arizona Department of Revenue (ADOR). The “Where’s My Refund” tool on AZTaxes.gov is the most efficient way to do this. You’ll need your Social Security number, filing status, ZIP code, and the tax year (2021) to check your status. This tool helps you confirm if your refund has been approved, processed, or issued.

E-filed returns are generally processed within two to three weeks. In contrast, paper returns may take up to eight weeks, especially if documents are missing or require manual review. Delays may also occur if your refund is reduced due to outstanding debts such as unpaid Arizona taxes, court-ordered obligations, or federal offsets.

If you owe a balance, ADOR will send a billing notice after processing your return. You can also view your account details and payment status on AZTaxes.gov by creating a secure login.

If you have questions, you may call ADOR at (602) 255-3381 (Phoenix) or (800) 352-4090 (statewide). Be sure to have your return details ready for faster assistance.

Final Checklist Before Filing 

Before submitting your Arizona tax return, use this final checklist to ensure accuracy and completeness:

• Verify personal details such as names, Social Security numbers, and filing status.
• Confirm your return is complete, including all required schedules, W-2s, and 1099 forms.
• Check math and entries; manual errors may delay your refund or cause incorrect tax assessments.
• Review your bank account information to ensure direct deposit details are correct.
• Sign your return (and have your spouse sign, if filing jointly).
• Include Form AZ-140V if mailing a payment.
• Choose the correct mailing address based on whether you're submitting a payment or expecting a refund.
• Retain copies of your federal and Arizona tax returns, including all documents and confirmations.

Taking time to complete this checklist helps avoid processing delays, notices, or potential penalties.

Frequently Asked Questions (FAQs)

What if I missed the April 18, 2022, deadline?

If you missed the deadline, file your return as soon as possible. Arizona charges a 4.5% late filing penalty per month (up to 25%) and 0.5% per month for late payments (up to 10%). Interest also accrues on unpaid taxes. Filing quickly can reduce the amount you owe in penalties and interest.

Can I file my Arizona return for free?

You may qualify for free e-filing through the Arizona Department of Revenue or the IRS Free File programs. Eligibility typically depends on your income level. Check AZTaxes.gov to view current income thresholds and approved free providers. Filing electronically ensures faster processing, fewer errors, and confirmation that your return was received.

What forms do part-year residents need to use?

Part-year Arizona residents must file Form 140PY instead of the full-year resident forms (140, 140A, or 140EZ). This form calculates income earned during your Arizona residency period. Include all applicable income, deductions, and tax credits, and attach supporting documents such as W-2s and 1099s.

How do I claim 529 plan deductions?

On your return, you can claim deductions for contributions to Arizona 529 education savings plans or 529A ABLE accounts. The limit is $2,000 per beneficiary ($4,000 if married filing jointly). Report contributions on the subtraction section of your Arizona return and retain proof of payment if documentation is requested later.

Do I need to file an extension or just pay?

You may file Form 204 for an extension or rely on a federal extension. However, an extension only delays filing, not payment. You must pay at least 90% of your 2021 Arizona tax liability by April 18, 2022, to avoid penalties. If you are filing by mail, submit Form AZ-140V and your payment.

What is the Arizona tax option for small business income?

Beginning in 2021, small business owners can elect to file a separate Small Business Income (SBI) tax return using Form 140-SBI. This return applies a flat 3.5% rate to qualifying business income and separates it from your tax liability. An optional annual election may benefit businesses aiming to simplify their tax reporting.

How long should I keep my Arizona tax records?

The Arizona Department of Revenue recommends keeping your state tax returns and supporting documents for at least four years. This includes W-2s, 1099s, deduction records, and proof of payments. Keeping organized records ensures you're prepared in case of an audit or amendment and helps verify past filings when necessary.