Alabama Department of Revenue Individual & Corporate Tax Division

1. Alabama Department of Revenue Individual & Corporate Tax Division Auburn University Tax Seminars Fall, 2012 Ann F. Winborne, CPA Assistant Division Director Tamera Harrell, Training Manager Andrea Wyatt, Revenue Examiner III

4. My Alabama Taxes - MAT • New in My Alabama Taxes (MAT)! You may now view a record of your individual and corporate estimated tax payments directly in MAT by logging in at https://myalabamataxes.alabama.gov. • Also-Withholding bulk filing began in October, 2012.

5. Debit Cards • 2013-Check box if you WANT refund on a debit card. • 2014-Check box if you DON’T want refund on a debit card. • 2015-Refunds automatically go on debit cards • Except over $7000 • Income Tax Refunds

6. Debit Cards • Unlimited FREE transactions at merchants in the U.S. • NO-FEE cash back transactions at merchants in the U.S. • Shop Online/Pay Bills • FREE teller-permitted withdrawals at any bank that accepts VISA. • Income Tax Refunds

7. Debit Cards • Transfer money from your card to your checking account for FREE. • FREE ATM withdrawals at Chase ($800 limit) • .50 charge at other ATM’s. • International fees. • Income Tax Refunds

8. Foreign Paper Payments • All paper payments drawn on foreign banks will not be deposited-will be sent back to divisions to contact taxpayer. • If taxpayer wants payment deposited, they will be responsible for bank fees, which can be substantial. • No payment under $200 will be processed.

9. Reminders

10. Depreciation Deduction • Alabama is following increased federal deduction of 100% bonus depreciation. • Alabama is also following increased Section 179 deductions allowed by Small Business Jobs Act of 2010.

12. Small Business Health Insurance Premiums • Qualifying employers can deduct an additional 100% of the amount paid as health insurance premiums on qualifying employees in connection with an employer-provided health insurance plan. • All tax years after 12/31/10.

13. Small Business Health Insurance Premiums • NEW Form 4020 • for employers to retain documentation on employees who qualify them for this deduction.

15. Reemployment Act of 2010 • Provides an income tax deduction to employers who hire individuals collecting unemployment or whose unemployment benefits have expired. • 50% of gross wages paid to each individual hired. • Must be employed 12 months to be eligible. • Effective for tax years 2011 and 2012.

16. Full Employment Act of 2011 • Provides small business employers with a $1000 tax credit for each newly-created job, with an hourly wage of $10 or more. • Hired after June 9, 2011 • Must be employed 12 months. • Effective for tax years after January 1, 2011. • Schedule C, corporations, pro-rata share to owners of subchapter S or K entities.

17. 2012 Legislation

18. Act 2012-168 • “Heroes for Hire” Tax Credit Act of 2012 • This bill provides an additional $1000 tax credit for businesses: • who meet the requirements of the Full Employment Act of 2011 • who hire an unemployed, recently discharged veteran (RDUV) • Discharged in 2 years prior to hire.

19. Act 2012-168Continued • Also provides a $2000 tax credit for unemployed veterans who start their own business. • Holds at least 50% ownership • Alabama business • Business started after April 2, 2012. • Business must have at least $300 net profit for the year credit taken.

20. Act 2012-168Continued • The $2000 tax credit for veterans and the additional $1000 credit for employers cannot both be used for the same employee. • For tax years beginning on or after January 1, 2012.

21. Act 2012-486 • “Jason Barfield Act” • Allows residents an income tax exemption for any payment made by the Department of Defense in the year declared deceased if taxpayer killed in action in a combat zone.

22. Act 2012-486Continued • Also exempts income earned by the spouse of the deceased in the year declared deceased. • Retroactive to January 1, 2011. • No statute of limitations on filing petition for refund.

23. 2012-335 • Provides for the continued collection of construction craft industry fees. • All licensed contractors performing work on any commercial construction project in Alabama must remit the fee to ADOR. • Used for the recruitment and training of new construction workers.

24. Act 2012-413 • Establishes a catastrophe savings account to provide reimbursements for: • insurance deductible amounts and • other uninsured portions of risks of loss • to owners of residential property from a catastrophic windstorm event.

25. Act 2012-413 • A “catastrophe savings account” is a regular savings account or money market account. • Must be labeled as a catastrophe savings account to be treated as one.

26. Act 2012-413 • Allows taxpayers a deduction against income earned for state income tax purposes for deposits into a catastrophe savings account. • One account per taxpayer • Deduction limited based on taxpayers insurance deductible. • Effective 5/15/2012.

27. Act 2012-54 • Expands tax incentives to investments in the coal mining industry. • 5% income tax credit for companies that invest more than $1 million in the coal industry. • Effective 3/1/2012.

28. Act 2012-391 • Provides an income tax credit of 20% of the cost of purchase & installation of irrigation equipment. • $10,000 limit • Must be taken the year the equipment is placed in service. • Effective tax years after 12/31/11.

29. Act 2012-483 • Alabama New Markets Development Act • Allows state income tax credits (or FIET) for investments in businesses in impoverished and low income communities. • Any unused credit available for 7 year carry-forward.

30. Act 2012-427 • Modifies the definition of gross income for Alabama tax purposes so that: • resident individuals who are partners or members of a partnership, LLC, or S-Corporation • must include their proportionate share of income from the PTE, whether the income is earned within or outside of Alabama.

31. Act 2012-427 • Also provides those resident individuals an income tax credit for a portion of the tax paid by the entity to another state. • Effective 5/15/2012.

32. 2012-474 • Alabama previously recognized “innocent spouse”relief only. • This bill changed the relief to any granted by Title 26 U.S.C. §6015, which includes innocent spouseand “injured spouse.” • Effective 5/15/2012.

33. 2012-474 • New Form- • AL 8379-Injured Spouse Allocation • Similar to Federal Form 8379.

34. Treatment of ROTH IRA’s • Alabama’s tax treatment will follow the IRS Code provision that allows a rollover from a traditional IRA to a ROTH IRA. • Gain is equally distributed and reported over tax years 2011 and 2012.

35. Treatment of ROTH IRA’sAct 2012-381 • Amends §19-3B-508, Code of Alabama, relating to qualified trusts under the IRC. • This amendment includes ROTH IRA’s as a qualified trust. • Effective 5/14/2012.

36. Act 2012-378 • Amends TBOR to discontinue the assessment of the late filing penalty in cases where an individual income tax return is filed reflecting no tax due. • Effective 5/14/2012 for tax returns filed for the 2011 and subsequent years.

37. New Income Tax Check-Offs • Victims of Crime and Leniency (VOCAL) • Alabama Veterinary Medical Foundation (for spay-neuter program) • Alabama Association of Rescue Squads

38. Regulations

39. 810-3-39-.12 • Reduces the number of Corporate Income Tax returns in order to be mandated to electronically file from 50 to 25. • Rule Hearing was October 10th.

40. 810-3-28-.07 • Reduces the number of Partnership/LLC returns in order to be mandated to electronically file from 50 to 25. • Rule Hearing was October 10th.

41. 810-3-27-.09 • Reduces the number of individual income tax returns that a tax preparer must submit in order to be mandated to electronically file from 50 to 11. • Rule Hearing was October 10th.

42. 810-27-1-4-.09.01 • Apportionment Formula: Double Weighting the Sales Factor. • For Taxable years beginning on or after 12/31/10.

43. Credit Paid to Other States • Information Release 9/12/2012 • Withdraw a change to the 2011 Schedule CR. • If taxpayer has already filed 2011 return, ADOR will flag their account, make an adjustment, and approve a refund if taxes are overpaid.

44. Credit Paid to Other States • If you have not already filed your 2011 there are 2 options: • Electronic or computer generated return-must file the Schedule CR that is included with the program/barcode and ADOR will recalculate along with others who have already filed.

45. Credit Paid to Other States • Use the corrected Schedule CR on our website, and file a paper return.

46. Credit Paid to Other States • Regulation 810-3-21-.03 • Maximum Credit for Tax Paid other Jurisdictions • Credit paid to other states cannot be used to offset tax liability attributable to Alabama sources. • Rule Hearing was October 10th.

47. Electronic Filing Information

48. Electronically Filed Returns • As of October 23, 2012-Individual Returns • 1, 313, 362 returns have been filed. • 74% returns filed electronically

49. Electronically Filed Returns • As of October 23, 2012-Business Returns • 97,189 business returns have been filed to date • 91.25% of business returns were filed electronically and accepted.

50. Electronically Filed Returns • Now offering BPT returns through e-filing software. • Forms CPT and PPT • Will be a separate submission, so will get a separate acknowledgement or rejection notice.