The Arizona Payments and Penalties section is where you enter certain payment- and penalty-related information that may affect your Arizona tax return. While some entries must be entered manually, many payment amounts are transferred automatically from your federal return.
For most taxpayers, this section requires little or no data entry. However, it's important to review it carefully to ensure your refund, balance due, and any applicable credits are calculated correctly.
What Can You Enter in the Arizona Payments and Penalties Section?
Claim Your Refund as a Credit Toward Next Year's Arizona Taxes
If you're expecting an Arizona refund, you can choose to apply all or part of that refund to your 2027 Arizona tax return.
Before entering an amount:
- Complete your Arizona return.
- Save the return.
- Review the refund amount generated by the program.
- Enter the portion of the refund you'd like applied to next year's taxes.
Keep in mind:
- The available refund amount must already exist on the return.
- If you enter more than the available refund, the amount will not transfer.
- If your return shows a balance due instead of a refund, no amount can be carried forward.
Applying a refund to next year's taxes can be useful if you expect to owe Arizona tax again and want to reduce future estimated payments.
Claim of Right Credit
The Claim of Right credit may apply if:
- You reported income in a prior year,
- Paid tax on that income, and
- Were later required to repay all or part of it.
When eligible, Arizona may allow a credit or adjustment to help prevent you from being taxed twice on the same income.
Because Claim of Right calculations can be complex, be sure to retain records showing:
- The year the income was originally reported.
- The amount repaid.
- Any federal calculations related to the repayment.
Extension Payment Amount
If you filed an Arizona extension and made a payment with that extension, enter the amount paid here.
Only enter:
- The amount actually paid with the Arizona extension.
Do not include:
- Withholding reported on Forms W-2 or 1099.
- Estimated tax payments already reported elsewhere.
- Payments that were never submitted.
Entering the correct extension payment ensures your Arizona refund or balance due is calculated accurately.
What Payment Information Is Transferred Automatically?
Most Arizona payment information comes directly from your federal return and will not appear as separate entry fields in this section.
Examples include:
- Arizona state income tax withholding.
- State withholding reported on Forms W-2.
- State withholding reported on Forms 1099.
- Other eligible state payment information transferred from federal return entries.
Because these amounts transfer automatically, it's important to verify that all state information has been entered correctly on your federal forms before preparing your Arizona return.
Review Your W-2 and 1099 Entries
Before filing, confirm that:
- Arizona is listed correctly as the state.
- State wages are entered accurately.
- State withholding amounts are correct.
- All Forms W-2 and 1099 have complete state information.
Incorrect state withholding entries can impact your refund or create an unexpected balance due.
When Will You Need This Section?
You may need to enter information in the Payments and Penalties section if:
- You want to apply a refund to next year's Arizona tax return.
- You qualify for a Claim of Right credit.
- You made a payment with an Arizona extension.
- Arizona directs you to provide additional payment information.
Many taxpayers will not need to manually enter anything in this section.
Additional Notes
- Most payment information transfers automatically from your federal return.
- Always review transferred withholding amounts for accuracy.
- Extension payments should only include amounts actually paid with the extension.
- Refund carryforward amounts cannot exceed the refund available on the return.
- Information entered in this section can affect your Arizona refund, balance due, penalties, and interest calculations.
Taking a few minutes to review the Arizona Payments and Penalties section before filing can help ensure your return is accurate and that you receive any refund or credit you're entitled to.