Alabama Form 40 Instructions
What's New For 2013?
My Alabama Taxes - A new feature on our Web site that will allow taxpayers to electronically file their Alabama Tax returns free, view any tax debts, payments, print copies of letters, print copies of their tax returns and change their address. Go to www.revenue.alabama.gov and click on the link for "My Alabama Taxes" to register.
Alabama Accountability Tax Act Credits - Taxpayers may be eligible for a tax credit for transferring their child from a failing public school to a qualifying nonfailing public school or nonpublic school. Resident taxpayers may be eligible for a tax credit for contributions made to a scholarship granting organization. For more information go to www.revenue.alabama.gov .
Electronic Filing - Receive your refund faster by electronically filing your return. Electronic filing is now available for non-residents. Visit our Web site, or talk to your preparer for more information.
Prepaid Card - Taxpayers have the option to have their refund issued via a prepaid VISA debit card. To qualify, your refund must be at least $20.00 but no more than $7,000.00. To elect this option just check the box for the debit card located on the refund line of your tax return. For more information concerning the prepaid debit card go to page 32.
Web Site - Check out our updated Web site at www.revenue.alabama. gov for downloadable forms, fill-in-forms, instructions, and the most accurate up-todate information available. Our Web site also hosts links to PC on-line filing providers supporting the Federal/State electronic filing program.
When Should I Expect My Refund?
Wait At Least 90 Days For Your Refund
If you do not receive your refund within 90 days of mailing your return, go to www.revenue.alabama.gov , then click on "Individual" and then "Where's My Refund", or complete Form IT:489. This form can be obtained at our web site www.revenue.alabama.gov/incometax/generaltax forms.htm or at any of our Alabama Taxpayer Service Centers listed on page 2 of this booklet. If you call about your refund, have a copy of your return with you or the Department may be unable to assist you.
Each year the Alabama Depart ment of Revenue receives over 1.8 million income tax re turns. Of this number, over 1 million taxpayers receive refunds. The Depart ment makes every effort to process your refund as quickly as possible, and there are several things you, the taxpayer, can do to help us accomplish this.
The date you file your return and how you file determines when you can expect your refund. For example, electronically filed returns are received and processed significantly faster than returns that are mailed to the Department of Revenue. Also, if you mail in an error-free return in January or February, you can expect to receive your refund sooner than if you wait until March or April to file. Last year over 50 percent of the income tax returns filed were received between April 1 and April 15. Returns filed this close to the deadline may require 90 days to process.
Common Mistakes Which Delay Refunds
Incorrect Name. Your refund debit card or check will be issued in the name(s) appearing on your return. If your name is illegible or misspelled, your refund debit card or check may be issued in the wrong name.
Incorrect Address. Last year the U.S. Postal Service was unable to deliver thousands of refund debit cards or checks due to incorrect addresses, or because the taxpayer moved and failed to leave a forwarding address.
Incorrect Social Security Number. Last year approximately 80,000 returns were received with missing or incorrect social security numbers. Your social security number is very important; it is used for identification of your file. Please compare the number on your return with the number on your social security card.
Show in the blocks provided the social security numbers in the same order as the first names. For example, the social security number of the first name listed should be entered in the box headed "Your social security number." The social security number of the second name should be entered in the box headed "Spouse's social security number." If separate returns are filed, the person filing the return should enter his or her social security number in the box headed "Your social security number," and enter the spouse's name and social security number on line 3. It is very important that the social security numbers be listed in this order so your refund debit card or check will be issued in the correct name.
Legibility. On many returns, the name, address, or social security number is not readable. If this happens, the wrong information may be recorded, and your refund check may be delayed. Make sure that the information you enter on the return is readable.
Missing Withholding Statement (W-2). Make certain the "State Copy" of all forms W-2 wage and tax statements are included, W-2s are frequently missing. The Department will consider the return incomplete if all required information is not included.
Incorrect Computation. Many returns must be corrected each year by the Department due to simple math errors. Before mailing your return, double check the addition and subtraction to make sure the math is correct. This is a good idea even if someone else prepares your return.
Misdirected Mailing. Each year thousands of returns are mailed to the Internal Revenue Service instead of the Alabama Department of Revenue. Use the envelope you received with this booklet or follow the mailing instructions on your return.
Filing More Than One Return. File only one Form 40, 40A, 40NR or electronic return for each tax year. If it is necessary to amend your original return, for years prior to 2008 you must file Form 40X, Amended Alabama Income Tax Return. For a 2013 return, you must file a completed return with the "Amended Return" box checked. The amended return will be processed after your original return has been processed.
Filing Copies. A copy of a return is not acceptable unless it has the taxpayer(s) original signature(s).
Missing Signatures. Thousands of unsigned returns are received each year by the Department. Before we can process them, these returns must be returned to the taxpayers for signatures. If a joint return is filed, both spouses must sign the return.
Other Reasons For Refund Delays
You Have Not Paid All Taxes Due From a Previous Year. If you owe tax for a prior year, your refund will be applied to pay that deficiency. Any amount remaining will be refunded to you. This will generally delay your refund 12 weeks or more.
Setoff Debt Collection. If the Alabama Department of Human Resources, the Alabama Department of Industrial Relations, the Administrative Office of Courts, or the Alabama Medicaid Agency has notified the Alabama Department of Revenue that your account is delinquent on a debt repayment, any public assistance program (including the Child Support Act of 1979, Chapter 10, Title 38), or any Medicaid assistance program, your refund will be applied to that debt. Note: See Setoff Debt Collection on page 17 for further information.
Federal Refund Offset Program. Your 2013 federal or state refund will be taken to satisfy any outstanding liabilities owed to the State of Alabama or to the Internal Revenue Service.
SECTION 1 - Filing Information
First, be certain you need to file a tax return. Your marital status, filing status, and gross income determine whether you have to file a tax return. Gross income usually means money, goods, and property you received on which you must pay tax. It does not include nontaxable benefits. See page 7 of the instructions to find out which types of income you should include.
Other Filing Requirements
Refunds. Even if your gross income was less than the amounts shown, you must file a return to get a refund if Alabama income tax was withheld from any amounts paid to you.
Domicile. Individuals who are domiciled in (or residents of) Alabama are subject to tax on their entire income whether earned within or without Alabama. This is true regardless of their physical presence within Alabama at any time during the taxable year. Domicile is where one lives, has a permanent home, and has the intention of returning when absent. Domicile may be by birth, choice, or operation of law. Each person has one and only one domicile which, once established, continues until a new one is established coupled with the abandonment of the old. Burden of proof regarding change of domicile is on the taxpayer even though he/she owns no property, earns no income, and has no place of abode in Alabama.
If an Alabama resident accepts employment in a foreign country for a definite or indefinite period of time with the intent of returning to the United States, the individual remains an Alabama resident and all income, wherever earned, is subject to Alabama income tax. This is true even if the taxpayer leaves no property in Alabama.
If a citizen of a foreign country comes to Alabama to work (no matter how long he stays), buys a home, secures an Alabama driver's license, does not intend to apply for U.S. Citizenship, and intends to ultimately return to the country of origin, the individual will be considered to have established domicile in Alabama. In other words, a foreign citizen domiciled in Alabama is liable for Alabama income tax on income earned from all sources.
Military Personnel (Residents). Military personnel, whose legal residence is Alabama, are subject to Alabama income tax on all income regardless of the source or where earned unless specifically exempt by Alabama law.
Military personnel (Army, Navy, Marine, Air Force, Merchant Marine, and Coast Guard) who were residents of Alabama upon entering military service remain residents of Alabama for income tax purposes, regardless of the period of absence or actual place of residence, until proof as to change of home of record has been made. The burden of proof is on the taxpayer though he owns no property, earns no income, or has no place of abode in Alabama. Under the provisions of the Soldiers' and Sailors' Civil Relief Act, military personnel are not deemed to have lost their permanent residence in any state solely because they are absent in compliance with military orders. In addition, persons are not deemed to have acquired permanent residence in another state when they are required to be absent from their home state by virtue of military orders. If the husband and wife are both in military service, each could be a resident of a different state under the Soldiers' and Sailors' Civil Relief Act. A spouse not in military service has the same domicile as the military spouse unless proven otherwise.
Military Personnel (Nonresidents). Nonresi dent military personnel merely having a duty station within Alabama (whose legal residence is not Alabama) are not required to file an Alabama income tax return unless they have earned income from Alabama sources other than military pay. If they have earned income in Alabama other than military pay, they are required to file Alabama Form 40NR. A married nonresident military person with income earned in Alabama may file either a separate return claiming himself or herself only, or a joint return claiming the total allowable personal exemption. The "Military Spouses Residency Relief Act" (Public Law 111- 97) states that the income for services performed by the spouse of a service member shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the spouse is not a resident of the jurisdiction in which the income is earned because the spouse is in the jurisdiction solely to be with the service member serving in compliance with military orders.
Dependent's and Student's Income. Dependents who are residents of Alabama must file a return if they meet the requirements under You Must File A Return If… on this page. A student's income is fully taxable to the same extent as other individuals who are required to file a return. The dependent or student can claim a personal exemption of $1,500, and his or her parents may claim a dependent exemption if they provided more than 50% of his or her total support. See Dependent Exemption on page 8.
When To File
You should file as soon as you can after January 1, 2014, but no later than April 15, 2014. If you file late you will have to pay penalties and interest. (See Penalties and Interest in these instructions.) If April 15 falls on a Saturday, Sunday, or state holiday, the return will be due the following business day.
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, 2014. If you anticipate that you will owe additional tax on your return you should submit your payment with a payment voucher (Form 40V) with the box "Automatic Extension Payment" checked by April 15, 2014.
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.
Original returns must be filed within two years of the date the taxes are paid to be eligible for a refund. Criminal Liability could result from a continued failure to file returns. (Refer to "Criminal Liability" on Page 16.)
Which Form To File
You MAY Use Form 40A If You Meet ALL The Following Conditions:
- You were a resident of Alabama for the entire year.
- You do not itemize deductions.
- You do not claim any adjustments to income, such as an IRA deduction, alimony paid, Federal income tax paid for a prior year, etc.
- You do not have income from sources other than salaries and wages except for interest and dividend income which cannot exceed $1500.00.
- You are not claiming income or loss from Schedules C, D, E, or F.
- You are not claiming credit for taxes paid to another state.
You MUST Use Form 40 If:
- You were a full or part-year resident of Alabama and do not meet ALL of the requirements to file Form 40A.
- You are itemizing deductions.
Part Year Residents
Part-year residents of Alabama should only report income earned while a resident of Alabama. Itemized deductions must be prorated to reflect only those expenses incurred while a resident of Alabama. Federal Tax Liability must be prorated by applying a percentage of Alabama adjusted gross income to Federal adjusted gross income in order to calculate the amount deductible on line 12 of Form 40. Part-year residents are allowed to deduct the full standard deduction, personal, and dependent exemptions.
You MUST Use Form 40NR If:
- You are not a resident of Alabama and you received taxable income from Alabama sources or for performing services within Alabama and your gross income from Alabama sources exceeds the allowable prorated personal exemption. Nonresidents must prorate the personal exemption. If your Alabama gross income exceeds the prorated amount, a return must be filed.
You MUST Use Both Form 40 and Form 40NR If:
- You had sufficient income to require the filing of a part-year return and also had income from Alabama sources while a nonresident during the same tax year. In this case, both the total personal exemption and the dependent exemption must be claimed on the part-year resident return. No exemption can be claimed on the nonresident return. The part year resident return should include only income and deductions during the period of residency, and the nonresident return should include only income and deductions during the period of nonresidency.
SECTION 2 - Steps for Preparing Your Return
By following these four useful steps, and reading the specific instructions, you should be able to prepare your return quickly and accurately.
Collect all your necessary records.
Income Records. These include any Forms W-2, W-2G, and 1099 that you have. If you do not receive a Form W-2 by February 1, OR if the one you receive is incorrect, please contact your employer as soon as possible. Only your employer can give you a Form W-2, and only he or she can correct it.
If you have someone prepare your return for you, make sure that person has all your income and expense records so he or she can fill in your return correctly. Remember, if someone else prepares your return incorrectly - you are still responsible.
Obtain any forms or schedules you may need.
In general, we mail forms and schedules to you based on the return you filed last year. Before filling in your return, look it over to see if you need more forms or schedules.
If you think you will need any other forms, get them before you start to fill in your return. Our Alabama Taxpayer Service Centers (see page 2 of these instructions for addresses) can supply the additional forms you need. We will send you the forms and schedules requested. Also, your local bank, post office, or public library may have some of them. The fastest way to obtain forms is to download them from our Web site at www.revenue.alabama.gov .
Sign and date your return.
Form 40, 40A, or 40NR is not considered a return unless you sign it. Please sign the return in black ink only. Your spouse must also sign if it is a joint return. Original signatures are required or the return will not be accepted.
Attach all necessary forms and schedules.
Attach the state copy of all Forms W-2, W-2G, and 1099 to the front of your return. Attach schedules and forms in sequential order, starting with Form 40.
If you need more space on forms or schedules, attach separate sheets and use the same format as printed forms, but show your totals on the printed forms. Please use sheets that are the same size as the forms and schedules. Be sure to put your name and social security number on these separate sheets and attach them at the end of the return.
Before mailing your return, check to make sure you have retained an exact copy for your records. If you owe tax, be sure to include your payment and Form 40V with your return.
SECTION 3 - Specific Instructions
Name and Address
Please type or print your name, address, and social security number in the appropriate blocks.
If you live in an apartment, please include your apartment number in the address. If the post office delivers mail to your P.O. box number rather than to your street address, write the P.O. box number instead of your street address.
Social Security Number
Each year thousands of taxpayers file returns using an incorrect social security number. Usually this number belongs to another taxpayer. It is very important that you file your return using the correct social security number. Failure to use your correct social security number(s) in the space(s) provided WILL DELAY the processing of your refund. Listed below are a few of the common reasons why a social security number is reported incorrectly:
- failed to enter number on return
- memorized wrong number
- copied number wrong
- gave an incorrect number to the tax preparer
- gave your employer an incorrect number
IMPORTANT: Check your W-2 forms. Your employer may be reporting an incorrect number for you.
If you are married and filing a joint return, write both social security numbers in the blocks provided.
If you are married and filing separate Alabama returns, write your spouse's social security number on line 3.
If your spouse is a nonresident alien, has no income, does not have a social security number, and you file a separate return, write "NRA" in the block for your spouse's social security number. If you and your spouse file a joint return, your spouse must have a social security number.
If you or your spouse do not have a social security number, please get Form SS-5 from a Social Security Administration (SSA) office. File it with your local SSA office early enough to get your number before April 15.
IMPORTANT: Please notify the Social Security Administration (SSA) immediately in the event you have changed your name because of marriage, divorce, etc., so the name on your tax return is the same as the name the SSA has on record. This helps prevent delays in processing your return.
Filing Status and Personal Exemption Lines 1 through 4
You should check only the box that describes your filing status. The personal exemption will be determined by your filing status on the last day of the tax year.
Consider yourself single if on December 31, 2013 you were unmarried or separated from your spouse either by divorce or separate maintenance decree. If you check box 1, enter $1,500 on line 13.
Married - Joint or Separate Returns?
Joint Returns. Most married couples pay less tax if they file a joint return. If you file a joint return, you must report all income, exemptions, deductions, and credits for you and your spouse. Both of you must sign the return even if only one of you had income. The State of Alabama does recognize a common law marriage for income tax purposes.
CAUTION: You cannot file a joint return if you are a resident of Alabama and your spouse is a resident of another state. You should file as "married filing separate."
You and your spouse can file a joint return if you were living together on December 31, 2013 even if you did not live together for the entire year. Both of you are responsible for any tax due on a joint return, so if one of you does not pay the other may have to.
Note: If you file a joint return, you may not, after the due date of the return, choose to file separate returns for that year.
If your spouse died in 2013, you can file a joint return for 2013. You can also file a joint return if your spouse died in 2013 before filing a 2013 return. For details on how to file a joint return, see Death of Taxpayer on page 17.
If you check box 2, enter $3,000 on line 13.
Separate Returns. You can file separate returns if both you and your spouse had income, or if only one of you had income.
If you file a separate return, report only your own income, exemptions, deductions, and credits. You are responsible only for the tax due on your return.
Note: Alabama is not a community property state.
If you file a separate return, write your spouse's social security number on line 3. If your spouse is not required to file, attach a statement explaining why.
If you check box 3, enter $1,500 on line 13.
Head of Family
An individual shall be considered "Head of Family" if, and only if, such individual is not married at the close of their tax year, is not a surviving spouse and their qualifying dependent is not a foster child.
You may check the box on line 4 ONLY IF on December 31, 2013 you were unmarried or legally separated and meet either test 1 or 2 below.
Test 1. You paid more than half the cost of keeping up a home for the entire year provided that the home was the main home of your parent whom you can claim as a dependent. Your parent did not have to live with you in your home,
Test 2. You paid more than half the cost of keeping up a home in which you lived and in which one of the following also lived for more than 6 months of the year (temporary absences, such as for vacation or school, are counted as time lived in the home):
- Your unmarried child, grandchild, great-grandchild, etc., adopted child, or stepchild. This child does not have to be your dependent.
- Your married child, grandchild, great-grandchild, etc., adopted child, or stepchild. This child must be your dependent. But if your married child's other parent claims him or her as a dependent under the Federal rules for "Children of Divorced or Separated Parents", this child does not have to be your dependent.
- Any relative whom you can claim as a dependent. (See definition of dependent on page 8.)
If the person for whom you kept up a home was born or died during the year, you may still file as "Head of Family" if the home was that person's main home for the part of the year he or she was alive.
A nonresident taxpayer who receives income from Alabama sources or for performing services within Alabama and who also had income while a resident of Alabama during the same tax year must file both the Alabama Nonresident Form 40NR and the Alabama Part-year resident Form 40. If you are required to file both returns, the total personal exemption and the dependent exemption must be claimed on the partyear return (Form 40). No personal exemption or dependent exemption can then be claimed on the nonresident return (Form 40NR).
All income is subject to Alabama income tax unless specifically exempted by state law. The term "income" includes, but is not limited to, salaries, wages, commissions, income from business or professions, alimony, rents, royalties, interest, dividends, and profits from sales of real estate, stocks, or bonds. Military pay is taxable income except for compensation received for active service in a designated combat zone.
Examples of Income You MUST Report
The following kinds of income should be reported on Forms 40, 40A, or 40NR and related forms and schedules.
- Wages including salaries, fringe benefits, bonuses, commissions, fees, and tips.
- Dividends (Schedule B).
- Interest on: bank deposits, bonds, notes, Federal Income Tax Refunds, mortgages on which you receive payments, accounts with savings and loan associations, mutual savings banks, credit unions, etc. (Schedule B).
- Original Issue Discount (Schedule B).
- Distributions from an Individual Retirement Arrangement (IRA) including SEPs and DECs, if you excluded these amounts in a prior year.
- Bartering income (fair market value of goods or services you received in return for your services).
- Business expense reimbursements you received that are more than you spent for the expenses.
- Amounts received in place of wages from accident and health plans (including sick pay and disability pensions) if your employer paid for the policy.
- Alimony or separate maintenance payments received from and deductible by your spouse or former spouse.
- Life insurance proceeds from a policy you cashed if the proceeds are more than the premium you paid.
- Profits from businesses and professions (Federal Schedule C or C-EZ).
- Your share of profits from partnerships and S Corporations (Schedule E).
- Profits from farming (Federal Schedule F).
- Pensions and annuities other than those listed in "Examples of Income You DO NOT Report."
- Lump-sum distributions, endowments.
- Gains from the sale or exchange (including barter) of real estate, securities, coins, gold, silver, gems, or other property (Schedule D).
- Gains from the sale of your personal residence as reported on your Federal return.
- Rents and Royalties (Schedule E).
- Your share of estate or trust income (Schedule E).
- Prizes and awards (contests, lotteries, and gambling winnings).
- Income from sources outside the United States.
- Director's fees.
- Fees received as an executor or administrator of an estate.
- Embezzled or other illegal income.
- Refunds of federal income tax if deducted in a prior year and resulted in a tax benefit.
- Payments received as a member of a military service are taxable except for combat pay and certain allowances.
- Property transferred in conjunction with performance of services.
- Jury duty pay.
Examples of Income You DO NOT Report
(Do not include these amounts when deciding if you must file a return.)
- United States Retirement System benefits.
- State of Alabama Teachers' Retirement System benefits.
- State of Alabama Employees' Retirement System benefits.
- State of Alabama Judicial Retirement System benefits.
- Military retirement pay.
- Tennessee Valley Authority Pension System benefits.
- United States Government Retirement Fund benefits.
- Payments from a "Defined Benefit Retirement Plan" in accordance with IRC 414(j). (Contact your retirement plan administrator to determine if your plan qualifies.)
- Federal Railroad Retirement benefits.
- Federal Social Security benefits.
- State income tax refunds.
- Unemployment compensation.
- Welfare benefits.
- Disability retirement payments (and other benefits) paid by the Veteran's Administration.
- Workman's compensation benefits, insurance damages, etc., for injury or sickness.
- Child support.
- Gifts, money, or other property you inherit or that was willed to you.
- Dividends on veteran's life insurance.
- Life insurance proceeds received because of a person's death.
- Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama.
- Interest on obligations of the United States or any of its possessions.
- Amounts you received from insurance because you lost the use of your home due to fire or other casualty to the extent the amounts were more than the cost of your normal expenses while living in your home. (You must report as income reimbursements for normal living expenses.)
- Military allowances paid to active duty military, National Guard, and active reserves for quarters, subsistence, uniforms, and travel.
- Subsistence allowance received by law enforcement and corrections officers of the State of Alabama.
- All retirement compensation received by an eligible fire fighter or a designated beneficiary from any Alabama firefighting agency.
- All retirement compensation received by an eligible peace officer or a designated beneficiary from any Alabama police retirement system.
- Death benefits received by a designated beneficiary of a peace officer or fireman killed in the line of duty.
- Income earned while serving as a foreign missionary after first serving 24 months as a missionary in a foreign country.
- Compensation received from the United States for active service as a member of the Armed Forces in a combat zone designated by the President of the United States.
- An amount up to $25,000 received as severance, unemployment compensation or termination pay, or as income from a supplemental income plan, or both, by an employee who, as a result of administrative downsizing, is terminated, laid-off, fired, or displaced from his or her employment, shall be exempt from state income tax. If the exempt severance pay is included in your state wages, contact your employer for a corrected W-2.
- Beginning January 1, 1998, all benefits received from Alabama Prepaid Tuition Contracts (PACT).
- Alabama 529 savings plan.
- Income received from the Department of Defense as a result of a member of the military killed in action in a designated combat zone.
- Any income earned by the spouse in the year of death of a member of the Military who has been killed in action in a designated combat zone.
Rounding Off to Whole Dollars
Round off cents to the nearest whole dollar on your return and schedules. You can drop amounts under 50 cents. Increase amounts from 50 to 99 cents to the next dollar. For example: $1.39 becomes $1.00, and $2.69 becomes $3.00.
Lines 5a through 5d - Wages, Salaries, Tips, Etc.
Show the name and address of each employer on lines 5a through 5d. In the column headed "Income" show the amount of wages you were paid before taxes, insurance, etc. were deducted. You should use the amount shown in the box headed "State Wages" on your Form W-2. The amount shown in this box may or may not be the same as the amount taxable for Federal purposes. All other taxable items listed on your W-2 form that are not included in the "State Wages" box should be entered on page 2, Part I, line 8.
If you had more than 4 employers during the tax year and the space provided on lines 5a through 5d is insufficient for listing each employer, you should attach a schedule with identical headings, and list all employers and amounts on this schedule. On line 5a write "See Attached Schedule," and record in columns A and B the totals for withholding and wages for all employers as listed on the attached schedule.
Note: State of Alabama employees will find that the amount taxable for state purposes is, in most cases, more than the amount taxable for federal purposes. This is due to the fact that amounts deducted from their wages as "Contributions to the Alabama State Retirement System" qualify for deferral on the Federal return, but do not qualify for deferral on the Alabama return. Part-year Residents. If you were a resident of Alabama for only a part of the year, enter only the income earned during the period of residence in Alabama. Statutory Employees. If you were a statutory employee, the "Statutory employee" box of your W-2 form should be checked. Statutory employees include full time life insurance salespeople, certain agent or commission drivers, traveling salespeople, and certain homeworkers.
If you are deducting business expenses as a statutory employee, report the amount shown in Box 1 of your W-2 form and your expenses on Schedule C. If you are not deducting business expenses, report your income on line 5.
Alabama Income Tax Withheld
In the column headed "Alabama tax withheld," enter the amount of Alabama income tax withheld by each of your employers. The amount withheld is shown on the state copy of your Form W-2. This copy should be marked "To Be Filed With Your Alabama Income Tax Return."
Note: Do not change or alter the amount of tax withheld or wages reported on your Form W-2. If any amount is incorrect or illegible, you should contact your employer and request a corrected statement.
Do not include the following as Alabama income tax:
- Federal income tax,
- FICA tax (Social Security and Medicare),
- Local, city, or occupational tax, or
- Taxes paid to another state.
List amounts withheld separately on the same line with the employer's name and amount of income.
Add the Alabama income tax withheld together and enter on line 22.
Line 6 - Interest and Dividend Income
Enter your TOTAL taxable income from interest and dividends. If the total taxable and nontaxable interest and dividends you received in 2013 is $1500 or more, you must complete and attach Schedule B. Part-year residents enter only the amount of interest and dividend income earned during the period of residency.
The payer should send you a Form 1099-INT, Form 1099-OID, or 1099-DIV, if applicable, showing interest or dividends you must report.
To see what interest and dividends are taxable, read the instructions for Schedule B in this booklet.
Line 7 - Other Income
All taxable income you received that is not reported on lines 5 and 6 should be entered on line 7. This includes rents, royalties, gains from sale of property, items not included in "State wages" box on W-2 forms, etc.
See Examples of Income You DO NOT Report and Examples of Income You MUST Report on page 7 of these instructions for further details on income which should be included on this line.
If you received a refund from the IRS in 2013 for a tax year prior to 2000, you are required to report the amount of the refund, net of any earned income credit, as income on line 7 of Form 40. Also, if any additional tax was paid to the IRS in 2013, for tax years prior to 2000, the amount of your payment, net of any interest or penalty, can be claimed as a negative amount on line 7. If you have income from other sources, you must complete page 2, Part I, and attach the appropriate schedule(s).
Line 9 - Adjustments to Income
If you made payments to a traditional Individual Retirement Arrangement (IRA) or to a Keogh plan, you may be entitled to claim these payments as an adjustment to income.
Also deductible as an adjustment to income are penalties you incurred for the early withdrawal of interest before maturity.
You can deduct payments of alimony or separate maintenance made under a court decree to the same extent allowed for federal income tax purposes.
Certain legal and medical expenses paid or incurred in the adoption of a minor are deductible as an adjustment to income.
Employees and self-employed persons may deduct certain moving expenses. The new job location must be within the state of Alabama.
Self-employed persons may deduct health insurance premiums to the same extent as allowed for federal purposes.
For more information on the above exclusions, please see the instructions for Part II on page 15.
The total adjustments to income from line 11, Part II, should be entered on line 9, page 1.
Line 10 - Adjusted Gross Income
If the amount on line 10 is less than zero, you may have a net operating loss that you can carry to another tax year. If you carry the loss back to earlier years, you should file Form 40X and attach Form NOL-85 and/or Form NOL-85A.
Line 11 - Itemized or Standard Deduction
You may elect to itemize your deductions for medical expenses, interest, contributions, taxes, etc., OR you may claim the Standard Deduction, but you cannot claim both.
If you elect to claim the Standard Deduction on your 2013 Alabama return and it becomes necessary to change to itemized deductions, you may do so by filing an amended return. You should figure your deduction both ways, and claim the one that gives you the larger deduction.
If you are married and filing separate Alabama returns, both spouses must itemize their deductions or both must claim the Standard Deduction. Each spouse may claim only the itemized deductions he/she actually paid. See the instructions for Schedule A for items that may be claimed as itemized deductions.
Part-year residents of Alabama may claim only the itemized deductions actually paid during the period of Alabama residency.
Itemized Deductions. If you elect to itemize your deductions, you should check box a on line 11 and complete and attach Schedule A.
Standard Deduction. If you elect to claim the Standard Deduction, you must check box b on line 11 and use the chart below to determine the Standard Deduction allowable on your return. A dependent or student may take the standard deduction even if claimed as a dependent by someone else.
Line 12 - Federal Income Tax Deduction
Use your 2013 federal income tax return and the worksheet on page 9 to determine your federal income tax deduction.
PLEASE NOTE: The Federal line references were correct at the time these forms and instructions were printed. However, there may have been changes to Federal forms after our print deadline and the line numbers referenced for our forms may have changed. If you have questions as to the correct line number on the Federal return, please feel free to call one of our taxpayer service centers listed on page 2.
Joint Federal and Separate Alabama Returns, or Part Year Residents. If a married couple elects to file a joint federal return and separate Alabama returns, or if filing as a part year resident, the federal income tax liability must be determined by a ratio of Alabama adjusted gross income to federal adjusted gross income. This calculation is required regardless of the method used in claiming other deductions.
Line 13 - Personal Exemption
Enter the personal exemption from line 1, 2, 3, or 4.
Note: Part year residents are allowed the full exemption amount. A dependent or student may take the personal exemption even if claimed as a dependent by someone else.
Line 14 - Dependent Exemption
A "dependent" as defined under Alabama law is an individual other than the taxpayer and his or her spouse who received over 50% of his or her support from the taxpayer during the tax year and is also related to the taxpayer in one of the following relationships:
|Legally adopted child||Sister-in-law|
|Grandchild||If related by blood:|
Note: You cannot claim a foster child, friend, cousin, yourself, or your spouse as a dependent under Alabama law.
Birth or Death of Dependent. You can take an exemption for a dependent who was born or who died during 2013 if he or she met the qualifications for a dependent while alive.
Support. You must have provided over 50% of the dependent's support in 2013. If you file a joint return, the support can be from you or your spouse. You cannot claim credit on an Alabama return for a dependent if you provided less than 50% of the support under Alabama law as you can under federal law in certain conditions. In figuring total support, you must include money the dependent used for his or her own support even if this money was not taxable (for example: gifts, savings, welfare benefits). If your child was a student, do not include amounts he or she received as scholarships.
Support includes items such as food, a place to live, clothes, medical and dental care, recreation, and education. In figuring support, use the actual cost of these items. However, the cost of a place to live is figured at its fair rental value.
In figuring support, do not include items such as income taxes, social security taxes, premiums for life insurance, or funeral expenses.
If you qualify to claim your child and/or other individuals as your dependent, you must complete Part III on page 2. The amount entered on page 2, Part III, line 2, should be entered on line 14, page 1.
Use the following chart to determine the per-dependent exemption amount.
Line 17 - Figuring Your Tax
You must figure your tax from the Tax Tables unless you are claiming a carryover or carryback Net Operating Loss from another year.
Indicate the method you are using by checking the appropriate box. If you are claiming a Net Operating Loss from another year you must complete and attach Form NOL-85A.
Credit for Taxes Paid to Another State. You must complete Schedule CR and you must attach a copy of other state's return or W-2G's if the taxing state does not allow a return to be filed for gambling winnings. The credit is provided to prevent the double taxation of income and is only available to legal residents of Alabama filing Form 40 who have income from sources outside of Alabama that is being taxed by Alabama and another state (or territory of the United States) in the same tax year. Residents of Alabama for only a part of the tax year can claim this credit only if the returns filed with Alabama and the other state cover the same periods.
If the state for which you are claiming a credit allows for credits instead of personal exemptions, call (334) 242-1000 for further information in converting this credit for Alabama purposes.
No credit is allowable when the income from sources outside of Alabama is totally offset by a corresponding deduction. However, income from sources outside of Alabama that is reported on the return and not totally offset by a corresponding deduction may result in a credit. In such cases the credit is limited to the lesser of the tax actually due to the other state or territory or the amount that would be due on the same income computed at the income tax rate in Alabama. An example of this situation is shown in the booklet in the instructions for Schedule CR on page 22.
For further information for Schedule CR see page 22.
Schedule OC. Schedule OC must be completed if you are claiming credit for taxes paid to another state, an employer sponsored basic skills education credit, rural physician credit, coal credit, Alabama Enterprise Zone credit, capital credit, Full Employment Act of 2011 credit, Heroes for Hire Tax Credit Act of 2012 Employee credit, Heroes for Hire Tax Credit Act of 2012 Business Start-up Expense Credit, qualified irrigation system/reservoir system credit, credit for taxes paid to a foreign county and/or rehabilitation, preservation and development of historic structures credit.
Basic Skills Education Credit is available to employers who provide basic skills education programs approved by the Alabama Department of Education to its employees.
Rural Physician Credit is available to licensed physicians who practice and reside in a small or rural Alabama community of less than 25,000 residents with admission privileges to a small or rural hospital having an emergency room. This credit is limited to 5 years. Coal Credit is available for corporations producing coal mined in Alabama. See Code of Alabama 1975, §40-18-220.
Alabama Enterprise Zone Act Credit. To stimulate business and industrial growth in depressed areas of the state, Alabama offers certain tax incentives to corporations, partnerships, and proprietorships which locate or expand within a designated enterprise zone. These tax credit incentives were enacted by Act No. 87-573 of the Alabama Legislature and signed into law on July 22, 1987 as the "Alabama Enterprise Zone Act." In order to qualify for the tax credits, a business must be located within a designated zone as approved by the Alabama Department of Economic and Community Affairs.
If a credit is earned by a partnership or S corporation, the credit will be distributed to each partner or shareholder based on the percentage of ownership. The partnership or S corporation should advise each partner or shareholder of the amount of his/her income subject to this credit.
For further information regarding the "Alabama Enterprise Zone Act" and the necessary forms to claim this credit, you should contact:
Alabama Department of Economic and Community Affairs
401 Adams Avenue
P. O. Box 5690
Montgomery, AL 36103-5690
Phone (334) 242-8672
Alabama Department of Revenue
P.O. Box 327410
Montgomery, AL 36132-7410
Phone (334) 242-1000
Capital Credit is available to investing companies and their recipients involved in a project undertaken by certain new businesses to be located in the state and certain expansions of certain existing businesses. This capital credit was enacted by Act 95-187 of the Alabama Legislature and signed into law on June 15, 1997 as the "Capital Credit."
For further information regarding the credits listed above and the necessary forms to claim these credits, you should contact:
Alabama Department of Revenue
P.O. Box 327410
Montgomery, AL 36132-7410
Full Employment Act of 2011 Credit. This credit is available to small business that creates new jobs paying more than ten dollars per hour. A small business is defined as a business that employs 50 or fewer employees. The credit shall equal $1,000 dollars for each qualifying new employee. The credit is available in the tax year during which the employee has completed 12 months of consecutive employment. The employer must have a net increase in the total number of full time employees in Alabama on the last date of each tax year during which employees are hired for which the employer claims a credit, over the number employed in Alabama as of the last day of the tax year immediately preceding the first employment year. The increase must equal or exceed the number of newly hired employees for which a credit is sought by one employee for each newly hired employee for whom a credit is being sought for the current year, plus one employee for all employees for whom credits were claimed in prior years.
Heroes for Hire Tax Credit Act of 2013 Employee Credit. This credit is available to small businesses that hire recently deployed and now discharged unemployed veterans. The credit is $1,000 and is in addition to the credit allowed by the Full Employment Act of 2011. The employer cannot take this credit for any employee that claims a business start-up credit allowed under the Heroes for Hire Tax Credit Act of 2012.
Heroes for Hire Tax Credit Act of 2012 Business Start-Up Expense Credit. This credit is available to recently deployed and now discharged unemployed veterans who start their own business. The amount of this credit is up to $2,000 dollars. To qualify the recently deployed unemployed veteran must hold at least 50 percent ownership interest in the business which must be located in Alabama and show a net profit of at least $3,000 for the year in which the credit is taken. The recently deployed unemployed veteran is not allowed to claim this credit if an employer has claimed a hire credit for him or her under the Heroes for Hire Tax Credit Act of 2012.
Qualified Irrigation System/Reservoir System Credit. This credit is available to any agricultural trade or business as described in the 2007 North American Industry Classification System, Sector 11. The credit is equal to 20 percent of the cost of the purchase and installation of any qualified irrigation equipment and any conversion costs related to the conversion of irrigation equipment from fuel to electricity or 20 percent of the accrued cost of the qualified irrigation equipment and the cost of constructing the qualified reservoir. The credit shall not exceed $10,000.00 in any tax year and shall not exceed the taxpayer's Alabama income tax liability computed without regard to the credit. Taxpayers can either take a credit for an irrigation system or a reservoir but not both. Qualified irrigation equipment is any equipment used by an agricultural trade or business in irrigation systems, including but not limited to equipment used to construct irrigation systems and water wells. A qualified reservoir is an off-stream upland reservoir used as a source of water for irrigation by an agricultural trade or business.
Credit for Taxes Paid to a Foreign Country. This credit is only allowed to resident individual owners of Subchapter K entities, Alabama S corporations, and resident beneficiaries of an estate or trust on their proportionate share of the entity's tax paid or accrued on foreign income. This credit does not apply to wages or any other type income earned in a foreign country. The amount of the credit allowable is 50 percent of the taxpayer's proportionate share of the income taxes paid or accrued to a foreign country by the entity or the tax using Alabama tax rates on the taxpayer's proportionate share of the entity's income derived from the foreign country whichever is less.
Rehabilitation, Preservation and Development of Historic Structures Credit. This credit allowed for the rehabilitation, preservation or development of historic structures. To claim this credit taxpayers must submit the Alabama Historic Commission Tax Credit Certificate.
For more information you should contact:
Alabama Historic Commission
468 South Perry Street
Montgomery, AL 36104
Schedule AATC. Schedule AATC must be completed if you are claiming the Credit for Transferring from Failing Public School to Nonfailing Public School or Non Public School and/or Credit for Contributing to Scholarship Granting Oranization.
Credit for Transferring from Failing Public School to Nonfailing Public School or Non Public School. This credit is available to taxpayers who transfer their child from a failing public school to a nonfailing public school or nonpublic school. The amount of the credit is the lesser of 80 percent of the average annual state cost attendfance for a public K-12 student during the applicable tax year or the Actual cost of attending a nonfailing public school or nonpublic school. For more information go to www.revenue.alabama.gov .
Credit for Contributing to Scholarship Granting Organization. This credit is available to taxpayers who make a contribution to an approved scholarship granting organization. The credit is the amount contributed to the scholarship granting organization for educational scholarships during trhe taxable year for which the credit is claimed up to 50 percent of the tax liability of the taxpayer not to exceed $7,500.00 per taxpayer or married couple filing jointly. For more information go to www.revenue.alabama.gov .
Line 19 - Consumer Use Tax
Review the purchases you made during 2013. If you purchased items for use in Alabama from out-of-state sellers who did not charge sales or use tax, you owe consumers use tax on the items. If you made no purchases from out-of-state sellers, enter 0 (zero) on line 19 and check the box.
Use tax is the counterpart of the sales tax. State use tax is imposed at the same rate and on the same type of transactions as sales tax and is due from the consumer when the sales tax is not collected. When you purchase merchandise from a retail store or other business establishment in Alabama, the seller is required to collect sales tax on the purchase. When you purchase merchandise from a business located outside of Alabama the seller might collect use tax on the purchase. However, not all out-of-state businesses are registered and required to collect Alabama tax. As the consumer, you are responsible for ensuring that sales or use tax is paid on your purchases. When you purchase merchandise for storage, use or consumption in Alabama and the retail seller does not collect tax on the purchase, you must report and pay consumer use tax on the purchase price. Usually, these purchases are made from catalogs, over the internet, or by telephone and include items such as:
- Computer Software
- Magazine Subscriptions
- Sporting Goods
- Electronic Equipment
- CDs, DVDs, Audio & Video Cassettes
- Photographic Equipment
- Musical Equipment
- Automotive Accessories and Parts
- Lawn and garden equipment
Applicable State Use Tax Rates
The general use tax rate of 4% applies to all purchases of merchandise, except where a different rate of tax is expressly provided.
The automotive use tax rate of 2% applies to purchases of automotive vehicles. Where any used vehicle is traded-in on the purchase of a new or used vehicle, the tax is due on the trade difference, that is, the price of the new or used vehicle purchased less the credit for the used vehicle taken in trade. The county licensing official will collect the tax due on purchases of automotive vehicles that are required to be titled or registered including purchases of automobiles, trucks, trailers, mobile homes, and motor boats. Do not include purchases of vehicles that are titled or registered in the calculation on the worksheet below. You must report and pay the use tax due on other purchases of automotive vehicles including ATVs, off-road motorcycles, riding lawnmowers, self-propelled construction equipment, and other self-propelled instruments of conveyance.
The agriculture use tax rate of 1-1/2% applies to purchases of machinery or equipment used in connection with the production of agricultural products, livestock, or poultry on farms and the replacement parts for such machinery or equipment. Where any used farm machinery or equipment is traded-in on the purchase of new or used farm machinery or equipment, the tax is due on the trade difference, that is, the price of the new or used machinery or equipment less the credit for the used machinery or equipment taken in trade.
Local Use Tax: City and County use tax may also be due and should be reported and paid to the appropriate local tax authority. For information about reporting local use tax please see the department's web page at http://www.revenue.alabama.gov/salestax/cutax.html .
You can use either the Alabama Use Tax Table below or the worksheet on page 9 if you only have Internet or catalog purchases that do not include automotive vehicles, farm machinery, or farm machinery replacement parts; otherwise use the worksheet on page 9 to compute Alabama Use Tax. For more information regarding consumers use tax call (334) 242-1490.
Line 20 - Alabama Election Campaign Fund
If you wish to make a voluntary contribution to Alabama's Democratic Party or Republican Party indicate the amount and party by checking the proper box(es) on lines 20a or 20b.
Each individual may contribute $1 to either party. If a joint return is filed, each spouse may contribute $1 to either party. If you make a voluntary contribution to this fund it WILL INCREASE your tax by the amount of the contribution.
The total amount entered on line 20a or 20b cannot exceed $2 for a married couple filing a joint return or $1 for all other filers.
Line 22 - Alabama Income Tax Withheld
Enter the total Alabama income tax withheld as shown on lines 5a thru 5d.
Line 23 - 2013 Estimated Tax Payments/ Automatic Extension Payment
Enter on this line any payments you made on your estimated Alabama income tax (Form 40ES) for 2013 or automatic extension (Form 40V).
CAUTION - DO NOT INCLUDE:
- The amount shown on line 27 of your 2012 Form 40. This is the balance you owed for the tax year 2012, and cannot be claimed as paid on your 2013 estimated tax even though you paid it in 2013.
- Any overpayment from 2012 that was refunded to you.
If you and your spouse paid joint estimated tax but are now filing separate Alabama income tax returns, either of you may claim all of the amount paid, OR you can each claim a part of it. Please be sure to show both social security numbers on the separate returns. If you and your spouse paid separate estimated tax but are now filing a joint income tax return, add the amounts you each paid.
These instructions also apply if your spouse died during the year.
Name Change. If you changed your name because of marriage, divorce, etc., and you made estimated tax payments using your former name, attach a statement to Form 40 explaining all the payments you and your spouse made in 2013 and the name(s) and social security number(s) under which you made the payments.
Caution: It is very important that the social security numbers be the same on your current return, your last year's return, and all of your estimate vouchers. The Department will be unable to allow you proper credit for your payments unless the numbers are the same. If the Department is unable to verify the amount claimed, you may be requested to submit copies of all your canceled checks substantiating the amount claimed. This will cause considerable delay in processing your return.
Line 24 - Previous Payments
This line is for amended returns only. Enter the amount of your previous payment made with your original return and/or billing notices and amended returns(s).
Line 27 - Previous Refund
This line is for amended returns only. Enter the amount of your previous refund from your original return and amended return(s).
Line 29 - Amount You Owe
(If line 21 is larger than line 28)
Subtract line 28 from line 21, and enter the amount on line 28 - this is the amount you owe the State of Alabama. It must be paid using Form 40V.
Pay the full amount by check or money order payable to the "Alabama Department of Revenue." On your payment write your social security number, your daytime telephone number, and "2013 Form 40," and remit your payment with Form 40V.
Electronic Bank Draft (E-Check): You can pay your taxes due electronically from your bank account online at https:// www. officialpayments. com/ echeck/ec_template_standard.jsp . Enter Jurisdiction Code 1100. You will need to have your bank routing number and your checking account number to use this service. There is no charge for this service.
Credit Card: You can also pay your taxes due by credit card online at https://www. officialpayments.com/ pc_ template_ standard.jsp or by phone at 1-800- 272-9829. Enter Juris dic tion Code 1100. You can also pay your taxes by credit card online at https://www.ALTaxPayment.com or by phone at 1-866-272-9829 or by visiting Value Payment Systems at www.payaltax.com . Discover/NOVUS®, MasterCard®, Visa® and American Express® cards are currently being accepted. There is a convenience fee for this service. This fee is paid directly to the company you use based on the amount of your tax payment.
How do I pay by ACH Debit?
You may pay by ACH Debit by going to www.revenue.alabama.gov/efiling.htm. Do not use Form 40V when paying by ACH Debit. 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 payment for the full amount of tax due is not paid by the due date of the return, you will be charged interest and will be subject to penalties. See Penalties and Interest on page 16. More importantly, if you submit your return without payment, a final assessment may be entered by the Department. A final assessment which is not appealed is as conclusive as a judgment of a circuit court. The Department may then proceed with collection by issuance of legal processes including recording of tax liens, garnishment of wages or bank accounts, levy, or a writ of seizure directed to the county sheriff as provided by Sections 40-1-2, 40-2-11(16), and 40-29- 23, Code of Alabama 1975.
Line 30 - Estimated Tax Penalty
If the amount you owe (line 28) exceeds $500.00, you may be subject to an estimate or underestimation penalty. Page 16 of this booklet provides additional information on these penalties. You may need to complete Form 2210AL. See page 31, "How to Obtain Forms."
Line 31 - Overpayment
(If line 28 is larger than line 21)
Subtract line 21 from line 28, and enter the amount on line 30 - this is the amount you overpaid.
Note: The Alabama Department of Revenue will issue you a Form 1099-G for the overpayment amount. If you elect to itemize deductions on your 2013 Federal return and claim a deduction for Alabama Income Tax paid in 2013, the amount shown on line 28 should be reported as income on your 2014 Federal return.
Line 32 - Applied to 2014 Estimated Tax
You may elect to credit all or part of the overpayment shown on line 31 to your 2014 estimated tax. (Place amount on line 32.) Once an election is made to apply this overpayment to your 2014 estimated tax, it cannot later be refunded to you or applied to pay additional tax for 2013. The amount entered on this line can only be claimed as a credit on your 2014 Alabama return.
Line 33 - Donation of Refunds
Enter amount from line 2, Schedule DC. (See page 21.)
You may elect to donate all or part of your overpayment, as shown on line 31, page 1, to one or more of the funds as provided by the Alabama Legislature. The amounts entered on these lines will be paid to the programs you indicate. Any amount you contribute may be claimed as an itemized deduction when you file your 2014 Alabama Income Tax Return. (Caution: When reporting your refund on your 2014 Federal return, you should report the amount of overpayment shown on line 30.)
Note: Amounts contributed to these funds WILL REDUCE your refund. Also, once an election is made to contribute to these funds, that election is irrevocable and cannot later be refunded. If your return is corrected by the Department, the amount contributed cannot be used to pay any additional tax due.
Line 34 - Refunded to You
Subtract the amounts on lines 32 and 33 from the amount on line 31. You should receive a refund for the overpayment. If you prefer you can elect to receive your refund via a debit card by checking the box. If you file an early, accurate return, we will be able to process your refund more quickly. See When Should I Expect My Refund? and Common Mistakes That Delay Refunds on page 4 of this booklet for further information about your refund.
Sign Your Return
Form 40 is not considered a return unless you sign it. Please sign in black ink only. Your spouse must also sign if it is a joint return. If you are filing a joint return with your deceased spouse, see Death of Taxpayer on page 17.
Did You Have Someone Else Prepare Your Return? If you fill in your own return, the Paid Preparer's Use Only area should remain blank. Someone who prepares your return but does not charge you should not sign.
Generally, anyone who is paid to prepare your tax return must sign your return and fill in the other blanks in the Paid Preparer's Use Only area of the return. If you have questions about whether a preparer is required to sign a return, please contact an Alabama Taxpayer Service Center.
The preparer required to sign your return MUST:
- Sign in the space provided for the preparer's signature. (Signature stamps or labels are not acceptable.)
- Give you a copy of your return for your records in addition to the copy to be filed with the Alabama Department of Revenue.
BEFORE signing and mailing your return you should review it to make sure the preparer has entered the correct name(s), address, and social security number( s) in the spaces provided and reported all of your income. REMEMBER, you are responsible for the information on your return even if you pay someone else to prepare it.
Please enter your daytime phone number. This will enable us to contact you and help speed your refund if there are any problems with processing your return.
If you want the Department to contact your tax preparer instead, please give permission to do so by checking the box above the signature line.
Where To File
Your envelope should be addressed in accordance with one of the following examples:
If you are not making a payment, mail your return to:
Alabama Department of Revenue
P.O. Box 154
Montgomery, AL 36135-0001
If you are making a payment, mail your return, Form 40V and payment to:
Alabama Department of Revenue
P.O. Box 2401
Montgomery, AL 36140-0001
Only your 2013 Form 40 return should be mailed to one of the above addresses. Prior year returns, amended returns, and any correspondence pertaining to your return should be mailed to:
Alabama Department of Revenue
Income Tax Division
P.O. Box 327464
Montgomery, AL 36132-7464
Part I, Page 2 - Other Income
Line 1 - Alimony Received
Enter the amounts you received as alimony or separate maintenance. Amounts you received in 2013 are taxable to the same extent as for federal purposes.
If you received payments under a divorce or separation instrument after 1984, see the instructions for line 4, Part II for information in determining whether these payments qualify as alimony.
Transfers of Property Between Spouses or Former Spouses. In general, no gain or loss will be recognized on a transfer of property between spouses or former spouses. Please refer to Federal Law for more details.
Lines 2 - Business Income or (Loss)
If you conducted a business or practiced a profession during the taxable year, you must complete and attach a copy of Federal Schedule C or C-EZ to your Alabama return.
Generally, you may deduct the ordinary and necessary expenses of doing business - the cost of merchandise, salaries, interest, taxes, rent, repairs, and incidental supplies. In the case of capital investments and improvements in depreciable property such as buildings, machines, and similar items having a useful life of more than one year, Alabama law provides for a "reasonable allowance" for depreciation over the useful life of the property.
If some of your expenses are part business and part personal, you can deduct ONLY the business portion.
Adjustments to Federal Schedules C and F. Alabama law differs from federal law in the treatment of some of the expenses shown on Federal Schedules C and F, and certain items may need adjusting for Alabama purposes. The expenses which may need adjusting are:
- Percentage Depletion Gas and Oil. In the case of oil and gas wells, the allowance for depletion shall be 12 percent of the gross income from the property during the taxable year, excluding from such gross income an amount equal to any rents or royalties paid or incurred by the taxpayer in respect to the property. Such amounts shall not exceed 50 percent of the net income of the taxpayer, computed without allowance for depletion, from the property, except that in no case shall the depletion allowance be less than the amount allowable under federal income tax law.
- Cost Depletion Natural Resources Other than Gas and Oil. Alabama law has no provision for percentage depletion of natural resources other than gas and oil, as currently allowed under federal law. For Alabama purposes, the depletion allowance shall be computed using the cost depletion method.
- Depreciation. Alabama law allows IRC Section 179 Expense for all taxable years beginning after December 31, 1989. Adjustments may be necessary if assets were acquired and placed in service prior to tax years beginning before January 1, 1990.
- Targeted "Jobs Credit." You may have been allowed to take a portion of your payroll expense as a "Targeted Jobs Credit" on your federal return. This is an allowable expense for Alabama income tax purposes.
- Passive Activity Losses. Alabama law has no provision, similar to current federal law, which limits the deduction of passive trade or business activity losses.
- Office and Home Expense. Alabama Law has no provision similar to current Federal Law which limits the amount of otherwise deductible office and home expense.
- Federal Economic Stimulus Act of 2008 Bonus Depreciation. Alabama law has no provision to allow a deduction for the bonus depreciation allowed by the Federal Economic Stimulus Act of 2008.
If you have adjustments involving any of the previously described expenses, attach an explanation and show the adjustment as "Other Expenses" on Federal Schedule C or F.
The net profit or (loss) from business, as shown on Federal Schedule C-EZ or C after above adjustments (if applicable), should be entered on line 2, Part I.
Line 3 - Gain or (Loss) from Sale of Real Estate, Stocks, Bonds, Etc.
If you sold real estate, stocks, bonds or other capital assets, use Schedule D to report the net gain (or loss). Schedule D is also used to report the net gain (or loss) from involuntary conversion of capital assets that are NOT held in connection with a trade or business, or a transaction entered into for profit.
If you sold your personal residence, any gain realized is taxable to the same extent as reported on your federal return. NOTE: A loss on the sale of a personal residence is NOT deductible.
For additional information, see the instructions for Schedule D on page 22.
Lines 4a and 4b - IRA Distributions ROTH and Educational IRAs
Use lines 4a and 4b to report IRA distributions you received. This includes regular distributions, early distributions, rollovers, Roth conversions, and any other money or property you received from your IRA account or annuity. Generally, you will receive a FORM 1099-R showing the "gross amount" and "taxable amount" of your distribution.
If your distribution is fully taxable, enter it on line 4b; no entry is required on line 4a. If only part of the distribution is taxable, enter the "taxable amount" on line 4b. You MAY need to complete the worksheet on page 13 to determine the amount taxable. If the "taxable amount" listed on your Form 1099R is correct for Alabama purposes as for Federal purposes then you will NOT need to complete the worksheet. If the "taxable amount" listed on your Form 1099R is NOT the same for Alabama purposes as for Federal purposes because you have a different cost basis, then you will need to complete the worksheet on page 13 to calculate the amount taxable for Alabama purposes.
IF THE IRA DISTRIBUTION IS ROLLED OVER, enter the total amount received on line 4a and the taxable portion, if any, on line 4b. Attach a statement to your return with complete information about the IRA, your cost in the plan, and the type of retirement account in which the distributed funds were invested.
Beginning in 1998, ROTH and EDUCATIONAL IRAs were recognized by the Alabama Department of Revenue. The same restrictions and limitations provided by the IRS apply when completing your Alabama return. However, be sure to use Alabama Adjusted Gross Income when computing your limitations.
FOR 2013, WHEN CONVERTING FROM A TRADITIONAL IRA TO A ROTH IRA, the taxable portion of the distribution (to be reported on Line 4b) is the amount that you would have to include in income if you had not converted or rolled over the traditional IRA into a Roth IRA. The taxable portion should not include any part of a withdrawal from a traditional IRA that is a return of your basis. CAUTION: If you have to complete the worksheet below to calculate partially taxable distributions from IRA withdrawals any "taxable amount" from the worksheet must be added to the taxable amount from any Roth conversion, or the taxable amount of any other IRA rollovers or distributions. The "grand total" of all taxable amounts from IRA distributions, rollovers, conversions, etc. should be included on Line 4b, of Form 40, Page 2, Part 1.
A "rollover" is a tax-free transfer of cash or other assets from one retirement program to another. There are two kinds of rollovers to an individual retirement arrangement (IRA): (1) a rollover from one IRA to another, and (2) a rollover from a qualified employer's plan to an IRA.
If you received a lump sum distribution from an Employee Benefit Plan, it should be included in gross income in the year received. There is no provision in Alabama law for forward averaging of such distributions.
If the lump sum distribution qualifies for the rollover provision of the Internal Revenue Code, it may also qualify for the rollover provision of the Alabama Income Tax Code as provided in Alabama Income Tax Regulation 810-3-25-.05(4) reprinted below:
Regulation 810-3-25-.05(4)- [Distributions from a trust that are not included in gross income of the individual for federal purposes due to the "rollover provisions" of Internal Revenue Code Sections 402, 403, 408, and 409 are excluded from Alabama gross income of the individual. These are:
- qualified stock bonus, pensions, or profit sharing plans as described in Internal Revenue Code Section 401(a), and which are exempt under Internal Revenue Code Section 501(a), and meet the rollover requirements of Internal Revenue Code Section 402,
- employee's annuities which meet the requirements of Internal Revenue Code Section 404(a)(2), and the rollover requirements of Internal Revenue Code Section 403,
- individual retirement accounts that qualify under and meet the rollover provisions of Internal Revenue Code Section 408, and
- retirement bonds that qualify under Internal Revenue Code Section 409 or Internal Revenue Code Section 219 and meet the "rollover provisions" of Internal Revenue Code Section 409.]
If the lump sum distribution qualifies and is rolled over, enter the total amount received and the taxable portion, if any, in the spaces provided on Form 40, Part I, lines 4a and 4b. A statement should also be attached to your return giving complete information about the retirement fund rolled over, your cost in the plan, and the type of retirement account in which the distributed funds were reinvested.
Lines 5a and 5b - Pensions and Annuities
Use lines 5a and 5b to report pension and annuity income you received. Also, use these lines to report distributions from SEP, Keogh, 401(k)(2), 403(b), and profit sharing plans. Generally, you will receive a Form 1099-R or a Form W-2P showing the amount of your distribution. Generally, unless specifically excluded by law, your pension payments are fully taxable if you did not contribute to the cost of your pension annuity or you have recovered your cost in the plan on prior Alabama income tax returns.
If your pension or annuity is fully taxable, enter it on line 5b; no entry is required on line 5a. If only part is taxable, see the worksheet on page 13 to determine the amount taxable. Enter the taxable amount of your pension or annuity on line 5b.
Worksheet for Partially Taxable Pensions, Annuities, and IRA Distributions
Use the worksheet on the previous page to report distributions from profit-sharing plans, retirement plans, employee savings plans, and individual retirement arrangements not fully taxable. Also, use this worksheet to report pension and annuity income not fully taxable. If the income or distribution is fully taxable you do NOT need to complete this worksheet. In general, you should receive a 1099-R showing the amount of your retirement plan distribution or income. If the taxable portion shown on your 1099-R is the same for Alabama purposes as for Federal purposes you do NOT need to complete this worksheet. Instead report the total and the taxable amount on Form 40, page 2, Part I, lines 4 or 5.
The taxable portion may NOT be the same for Alabama purposes as for Federal purposes because you may have a different cost basis. In this case, you must complete this worksheet to calculate the amount taxable for Alabama purposes.
Amounts you received from the following retirement systems are not taxable and should not be reported.
- Alabama Teacher's Retirement System.
- Alabama Employee's Retirement System.
- Alabama Judicial Retirement System.
- Civil Service Retirement System.
- Retirement Systems created by the Federal Social Security Acts.
- Railroad retirement benefits received under the Federal Railroad Retirement Acts of 1935 and 1937.
- Military Retirement Pay.
- TVA Pension System Benefits.
- U.S. Foreign Service Retirement and Disability Fund Annuities.
- U.S. Government Retirement Fund Benefits.
- Retirement benefits received from any Alabama firefighting agency by any eligible firefighter or designated beneficiary.
- Retirement benefits received from any Alabama police system by any eligible peace officer or designated beneficiary.
- Any "defined benefit" retirement plan in accordance with IRC 414(j). (Contact your retirement plan administrator to determine if your plan qualifies.)
Use lines 1 through 8 to report amounts you withdrew from your IRA, SEP, Keogh, 401(k)(2), or 403(b) account which are not fully taxable and for which you have not recovered any of your cost basis before January 1, 1987. If you began recovering your cost before January 1, 1987, you should report these distributions on lines 11, 12, and 13.
A - IRA, SEP, Keogh, 401(k)(2) or 403(b) Distributions you received in 2013 which included nondeductible contributions.
Line 1. Enter the total value of your IRA, SEP, Keogh, 401(k)(2) or 403(b) account at the end of the taxable year. The amount entered on this line should include any withdrawals you made from the account during 2013. If you have more than one IRA (or other type account) you must enter the total value of all such accounts even though you made withdrawals in 2013 from only one or more of these accounts.
Caution: If you have more than one type of account (IRA, SEP, etc.) which includes contributions from which you received nondeductible distributions in 2013, you must make a separate computation for each type of account.
Line 2. Nondeductible contributions. Non deductible contributions are those contributions to an IRA (or other type account) for which you have not claimed an adjustment to income on a previous year's return.
If a distribution is made from an IRA you contributed to prior to your residency in Alabama, your basis in that IRA for Alabama purposes will be the same as your basis for federal purposes.
Amounts may be considered nondeductible contributions for the following reasons:
- The Federal Tax Reform Act of 1986 allowed you to make nondeductible contributions to your IRA even if you were unable to deduct all, part, or none of the contributions. Your nondeductible contribution is the difference between your total allowable IRA contributions (up to the maximum amount) and the amount you deducted on your Alabama return that year.
- Qualified contributions made by you to an individual retirement arrangement (IRA), simplified employee pension (SEP), or Keogh plan before January 1, 1982, are considered part of your nondeductible contributions since Alabama did not allow you to defer tax on these contributions.
- Qualified contributions you made to a Federal 401(k)(2) plan or 403(b) plan before January 1, 1985 are considered part of your cost since Alabama did not allow you to defer tax on these contributions.
Line 3. Enter the total of all amounts you have withdrawn from these accounts and excluded from income on a previous year's Alabama return.
Line 4. Subtract line 3 from line 2 and enter the result on line 4. The difference in these amounts represents the balance of your nondeductible contributions.
Line 5. 2013 Withdrawals. Enter the total of all amounts you withdrew from your IRA or other deferred compensation accounts during the taxable year.
Line 6. Exclusion Ratio. Divide the amount on line 4 by the amount on line 1. This ratio will be used to figure the amount of nondeductible contributions that may be excluded this year.
Line 7. Amount of Exclusion. Multiply the amount on line 5 by the percentage on line 6. Enter the result here, but do not enter more than the amount on line 4.
Line 8. Subtract the amount on line 7 from the amount on line 5.
If the amount on line 8 is received from an IRA account, enter it on line 4b, Part I, Form 40. If from some other type account, it should be entered on line 5b. If you received distributions from two or more different types of accounts (IRA, SEP, Keogh, etc.), you should complete a worksheet for each type of account.
B - Pensions, annuities, etc., you began receiving after December 31, 1986 in which you had a cost basis.
Lines 9 and 10. Use these lines to report only the pensions and annuities you first began receiving in 1987 which are not fully taxable and for which you used the Federal Annuity Tables to compute the taxable portion on your federal return.
The taxable part of these pensions and annuities is computed in the same manner as figured for federal purposes. If the cost basis for Alabama purposes and Federal purposes is the same, the taxable part will be the same. If the cost basis is different for Alabama, the taxable part will be different. For details, refer to Federal instructions and Federal Publication 575, Pension and Annuity Income. Enter the full amount you received on line 9 and the taxable portion on line 10.
If you qualify to use the Federal Simplified General Rule, you will probably find it both simpler and more beneficial than the Federal General Rule in figuring the taxable and nontaxable parts of your annuity.
If you meet the conditions to choose the Federal Simplified General Rule, use the worksheet on below to figure your taxable pension for 2013. In completing this worksheet, use your age at the birthday preceding your annuity starting date. Be sure to keep a copy of the completed worksheet because it will help you figure your 2013 taxable pension.
C - Pensions, annuities, etc., you began receiving prior to January 1, 1987 in which you have not recovered your cost.
Lines 11 and 12. Use these lines to report pensions and annuities, which are not fully taxable, that you first began receiving prior to 1987. Enter on line 11 the full amount of these pensions that you received in 2013 and enter your unrecovered cost on line 12.
For amounts you began receiving prior to 1987, you can exclude from the taxable amount your unrecovered cost to the plan. Your cost is the amount you contributed plus the contributions your employer made on which you have already paid tax. After you recover your costs, all amounts you receive are fully taxable. Refer to the instructions for line 2 for information concerning amounts that are considered part of your cost basis of an IRA, SEP, Keogh, 401(k)(2), or 403(b) account.
Beneficiaries. If a former employee is receiving a pension or annuity and dies after recovering all of his or her cost, the entire amount the beneficiary receives is taxable for Alabama purposes. However, if the pension or annuity was exempt under Alabama law to the former employee, it is also exempt to the beneficiary.
If a former employee dies before recovering the entire cost, the beneficiary should continue to report the amounts received in the same manner as reported by the former employee. If the former employee began receiving payments after De cem ber 31, 1986, the beneficiary must continue to use the Federal Annuity Tables based on the beneficiary's life expectancy in determining the taxable part. If the deceased former employee began receiving payments before January 1, 1987, and has not recovered the cost, the beneficiary will continue to recover the cost before any amounts become taxable.
Line 14. Add the amounts on lines 10 and 13.
If the amount on line 14 is received from an IRA account, enter it on line 4b, Part I, Form 40. If from some other type account, the amount on line 14 should be entered on line 5b, Part I, Form 40. If you received distributions from two or more different types of accounts, you should report the total of all accounts on either line 4b, Part I, Form 40, or line 5b, Part I, Form 40 depending on the type of distribution received.
Line 6 - Rents, Royalties, Partnerships, Estates, Trusts, Etc.
Use line 6 to report income from rents, royalties, partnerships, S corporations, trusts, and estates. For more information, see the instructions for Schedule E. Schedule E should be completed and attached to Form 40.
Lines 7 - Farm Income or (Loss)
If you operated a farm during the year, you must attach Federal Schedule F to your return.
Alabama law differs from federal law in the treatment of certain items. See the instructions for line 2a, Part I, for a description of the items that may need adjusting. If you have adjustments to any of these items, attach an explanation, and show the adjustment as "Other Expenses" on Federal Schedule F.
The net profit or (loss) from farming as shown on Federal Schedule F, after making the necessary adjustments, should be entered on line 7, Part I.
Line 8 - Other Income
Enter on line 8 any income you cannot find a place for on your return or other schedules. State the nature and source in the spaces provided, or attach a separate explanation.
Part II, Page 2 - Adjustments To Income
Lines 1a and 1b - Individual Retirement Arrangement (IRA) Deduction
Contributions to an Individual Retirement Arrangement (IRA) may be taken as an adjustment to income. These contributions represent a deferral of tax on a portion of your income. At the time funds are distributed from these accounts, the amount on which tax has been deferred cannot be claimed as a cost basis in the fund. Since the Alabama Income Tax Law prior to 1982 did not allow these contributions to be deducted from gross income, you may have a cost basis in the fund for amounts contributed prior to 1982. Accurate records should be kept of the amounts contributed in order for you to be able to determine your cost basis when the funds are withdrawn.
Use the worksheet in your Federal Form 1040 lineby- line instructions to calculate the amount allowable. The amount deductible on your Alabama return is subject to the same limitations as allowable on your 2013 Federal return. However, when figuring the limitation on the amount deductible use the adjusted gross income shown on line 10 of your Alabama return without benefit of the IRA deduction.
Line 2 - Keogh Retirement Plan and SEP Deduction
Self-employed individuals may deduct contributions to a Keogh plan from gross income. These contributions represent a deferral of tax on a portion of income. The allowable contributions also include those qualified contributions made under a Simplified Employee Pension (SEP) Plan. At the time funds are distributed from these accounts, the amount on which tax has been deferred cannot be claimed as a cost basis in the fund. Since the Alabama Income Tax Law prior to 1982 did not allow these contributions to be deducted from gross income, you may have a cost basis in the fund for amounts contributed prior to 1982. Accurate records should be kept of the amounts contributed in order to determine your cost basis when the funds are withdrawn.
Line 3 - Penalty on Early Withdrawal of Savings
The Form 1099-INT given to you by your bank or savings and loan association will show the amount of any penalty charged because you withdrew funds from a time savings deposit before its maturity. Enter this amount on line 3. (Be sure to include the interest income on Form 40, page 1, line 6.) Note: Penalties on early withdrawal from retirement plans are not deductible.
Line 4 - Alimony Paid
You can deduct payments of alimony or separate maintenance made under a court decree to the same extent allowed for federal income tax purposes. Do not deduct lump-sum cash or property settlements, voluntary payments not made under a court order or a written separation agreement, or amounts specified as child support. The name, social security number, and address of the person receiving the payments should be shown in the space provided.
Line 5 - Adoption Expenses
Beginning January 1, 1991, the reasonable medical and legal expenses paid or incurred by the taxpayer in connection with the adoption of a minor may be deducted as an adjustment to income. The term "medical expenses" include any medical and hospital expenses of the adoptee and the adoptee's biological mother which are incident to the adoptee's birth, and subsequent medical care and which, in the case of the adoptee, are paid or incurred before the petition is granted. Adoption agency fees are not deductible.
The expenses allowed in your 2013 return are limited to those expenses paid or incurred on or after January 1, 2013, even though adoption proceedings may have begun before this date. A resident of Alabama for only a part of 2013 may deduct only those expenses paid or incurred while a resident of Alabama. Accurate records of all expenses claimed as an adjustment to income must be maintained by the taxpayer and be available to the Alabama Department of Revenue upon request.
Line 6 - Moving Expenses
Employees and self-employed persons (including partners) may deduct certain moving expenses as an adjustment to gross income to the same extent and subject to the same limitations as currently allowed under federal rules with the following exception:
- The new job location must be within the State of Alabama.
This deduction may be taken if you moved in connection with your job or business and your new workplace in Alabama is at least 50 miles farther from your old residence than your old workplace was from your former residence. If you had no former workplace, your new workplace must be at least 50 miles from your old residence.
ly expenses incurred in the moving of household goods and peronal effects from the former residence to the new residence and traveling expenses, including lodging while en route to the new location are deductible. Expenses which are no longer deductible include the cost of meals while en route to the new location, premove house hunting trips, temporary living expenses, closing costs of selling the old house, costs of purchasing a new house, and costs incurred in settling an unexpired lease.
If you meet the requirements complete and attach Federal Form 3903 to figure the amount of moving expenses. Enter the total and the new job location as indicated on line 6.
Line 7 - Self-employed Health Insurance Deduction
You can deduct self-employed health in sur ance premiums to the same extent as allowed for federal purposes.
Line 8 - Alabama Prepaid Affordable College Tuition Program (PACT) or Alabama College Education Savings Program Deduction
Beginning January 1, 2008 you can deduct up to $5,000.00, or $10,000.00 if filing joint, per year for payments made to the Alabama Prepaid Affordable Tuition Program (PACT) or the Alabama College Education Savings Program.
Line 9 - Health Insurance Premium Deduction
Alabama resident taxpayers may deduct from Alabama gross income 100 percent of the amounts that they pay as health insurance premiums as part of an employer provided health insurance plan who are employed by an employer that has less than 25 employees and earns no more than $50,000.00 of wages and reports no more than $75,000.00 of adjusted gross income on their Alabama individual income tax return or $150,000.00 if married filing joint.
Line 10 - Expenses to Retrofit/Upgrade Home to Resist Wind or Flood Damage
Alabama residents may deduct from gross income the lesser of 50 percent of the cost or $3,000.00 to retrofit or upgrade their home to resist wind or flood damage. The taxpayer must have a certification as prescribed under Chapter 31D, Title 27, Code of Alabama 1975 or the Alabama Residential and Energy Codes Board.
Line 11 - Deposits to a Catastrophe Savings Account
Alabama residents may deduct from gross income deposits made to a catastrophe savings account. The deduction is $2,000.00 if the insurance deductible is equal to or less than $1,000.00. If the deductible is greater than $1,000.00 the amount of the deduction is the lesser of $15,000.00 or twice the amount of the insurance deductible. If the taxpayer is self-insured and chooses not to obtain insurance then the deduction is the lesser of $250,000.00 or the value of the taxpayer's legal residence.
Part III, Page 2 - Dependents
Before completing this section, see page 8 of these instructions for the definition of a dependent. Please follow the line-by-line instructions on Form 40 to complete this section.
NOTE: If you used Federal Form 8332 (Release/ Revocation to claim exemption for child by custodial parent), or if you are NOT claiming a dependent as a dependent for this tax year - DO NOT fill out (4) Did you provide more than one-half dependent's support.
Part IV, Page 2 - General Information
ALL TAXPAYERS MUST COMPLETE THIS SECTION
Check the appropriate block for either full year or part year residency status.
Full Year Resident. Check here if you were a legal resident of Alabama even if you were employed outside Alabama.
Part-Year Resident. Check here if you were not a legal resident of Alabama for the entire year. (EXAMPLE: During 2013 you moved into Alabama and became a resident, or you moved out of Alabama and became a resident of another state.)
Enter the Adjusted Gross Income and Taxable Income as reported on your 2013 Federal Income Tax Return. This information is required under Section 40-18-56, Code of Alabama 1975.
If you received income from sources taxable for Federal purposes but exempt for Alabama tax purposes, the source(s) and amount(s) should be entered on line 5 unless they are explained elsewhere on the Alabama return.
Example: U.S. Civil Service Retirement is exempt for Alabama purposes and therefore should be shown on line 5.
Direct Deposit Information
Direct deposit is only available for electronically filed or Alabama Form 40 individual returns.
In order to receive a direct deposit refund for a paper return, your return must be prepared using tax preparation software that utilizes 2D bar code technology or from our Web site by using the Form 40 with calculations.
Note: You cannot use the blank Form 40 to receive a direct deposit refund.
WARNING: Due to changes in the electronic banking rules, the Alabama Department of Revenue will no longer allow direct deposits to or through foreign financial institutions. If you use a foreign financial institution you will be issued a paper check.
The routing number must be nine digits. The first two digits must be 01 through 12 or 21 through 32. Otherwise, the direct deposit will be rejected and a check sent instead. Your check may state that it is payable through a financial institution different from the one at which you have your checking account. If so, do not use the routing number on that check. Instead, contact your financial institution for the correct routing number to enter on line 1a.
The account number can be up to 17 characters (both numbers and letters), to include hyphens but omit spaces and special symbols. Enter the number from left to right and leave any unused boxes blank. Be sure not to include the check number.
WARNING: Some financial institutions will not allow a joint refund to be deposited into an individual account. If the direct deposit is rejected, a check will be sent instead. The Department is not responsible if a financial institution rejects a direct deposit. If you are unsure of the routing number and/or account number, you should check with your financial institution to ensure they are correct. the Department is not responsible for a lost refund if you enter the wrong account information.
SECTION 4 - General Information
This section contains general information about items such as amending your tax return, how long to keep records, and filing a return for a deceased person.
Substitute Tax Forms
You may not use your own version of a tax form unless it meets the requirements of the Alabama Department of Revenue. All privately designed and printed substitute tax forms must be approved by the Alabama Department of Revenue.
Penalties and Interest
Interest. Interest is charged on taxes not paid by their due date even if an extension of time is granted. If your return is not filed by the due date and you owe additional tax, you should add interest from April 15, 2013 to date of payment. Submit payment of the tax and interest with your return. Alabama law provides that the same rate of interest shall be collected as currently prescribed by the Internal Revenue Service. Any of the Alabama Tax payer Service Centers listed on page 2 of this book let will provide the current rate of interest in effect at the time your return is filed.
Failure To Timely File Return. Alabama law provides a penalty of 10% of the tax due or $50.00, whichever is greater, if filed late. The penalty does not apply to a tax return filed indicating no tax due or a refund.
Failure To Timely Pay Tax. The penalty for not paying the tax when due is 1% of the unpaid amount for each month or fraction of a month that the tax remains unpaid. The maximum penalty is 25%.
Underpayment Penalty. If the amount you owe for 2013 is $500.00 or more you may owe the penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of:
- 90% of your 2013 tax (66-2/3% for farmers), or
- 100% of your 2012 tax. (Your 2012 tax return must cover a 12-month period.) Use Form 2210AL to calculate the penalty.
Note: If you included interest, a failure to timely file, or a failure to timely pay penalty with your payment, identify and enter these amounts in the bottom margin of Form 40, page 1. The only penalty to be included on lines 28 and 29 of Form 40 is the underpayment penalty.
Other Penalties. There are also penalties for filing a frivolous return, underpayment due to negligence, underpayment due to fraud, substantial understatement of estimated tax, and failure to file estimated tax.
Any person failing to file a return as required by Alabama law or rendering a willfully false or fraudulent return will be assessed by the Alabama Department of Revenue on the basis of the best information obtainable by the Department with respect to the income of such taxpayer.
Criminal Liability. Section 40-29-112, Code of Alabama 1975, as amended, provides for a more severe penalty for not filing tax returns. Any person required to file a return under this title who willfully fails to make such return shall be guilty of a misdemeanor and upon conviction thereof, shall be fined not more than $25,000 or imprisoned not more than 1 year, or both. Section 40- 29-110 provides that any person who willfully attempts to evade any tax imposed by this title or the payment thereof shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 5 years, or both. These penalties are in addition to any other penalties provided for by Alabama law.
If you move after filing your return and expect a refund, you should notify the Department of Revenue and send a change of address notice to: Alabama Department of Revenue, Individual and Corporate Tax Division, P. O. Box 327410, Mont gomery, AL 36132- 7410. This will help forward your check to you as soon as possible.
Corresponding With Alabama Department of Revenue
Be sure to include your social security number and phone number in any letter to the Alabama Depart ment of Revenue. (See "Where To File," page 12.)
How Long Should Records Be Kept?
Keep records of income, deductions, and credits shown on your return, as well as any worksheets used to figure them, until the statute of limitations runs out for that return. Usually this is 3 years from the date the return was filed. If income that should have been reported was not reported and the income omitted is in excess of 25% of the stated income, the period of limitation does not expire until six (6) years after the due date of the return or six (6) years after the date the return was filed, whichever is later. There is no period of limitation when a return is false or fraudulent, or when no return is filed.
Also keep copies of your filed tax returns as part of your records. You should keep some records longer than the period of limitation. For example, keep property records (including those on your own home) as long as they are needed to figure the basis of the original or replacement property. Copies of your tax returns will help in preparing future returns, and they are necessary if you file an amended return. Copies of your returns and your other records may be helpful to your survivor, or the executor or administrator of your estate.
Requesting a Copy of Your Tax Return
If you need a copy of your tax return or tax account information use Form 4506-A, Request for Copy of Tax Form or Income Tax Account Information. The charge for a copy of a return is $5. There is no charge for tax account information.
If you have already filed a return and become aware of any changes to income, deductions or credits, you should file an amended tax return. for tax years prior to tax year 2008 you should mail in a completed Form 40X, Amended Alabama Individual Income Tax Return, to change those items. Beginning with tax year 2008 you should file a completed Alabama Individual Income Tax Return with the "Amended" box checked. A detailed explanation page of all the changes made should be attached to the tax return.
Note: If your State return is changed for any reason, it may affect your Federal Income Tax liability. This would include changes made as a result of an examination of your return by the Alabama De part ment of Revenue. Contact the Internal Revenue Service for more information.
Death of Taxpayer
If the taxpayer died before filing a return for 2013, the taxpayer's spouse or personal representative must file a return for the person who died if the deceased was required to file a return. A personal representative can be an executor, administrator, or anyone who is in charge of the taxpayer's property.
The person who files the return should write "DECEASED" after the decedent's name. Also write "DECEASED," the decedent's full name, and date of death across the top of the tax return.
If the taxpayer did not have to file a return but had tax withheld, a return must be filed to receive a refund. If your spouse died in 2013, you can file a joint return even if you did not remarry in 2013. You can also file a joint return if your spouse died in 2014 before filing a 2013 return. A joint return should show your spouse's 2013 income before death and your income for all of 2013. Also write "Filing as surviving spouse" in the area where you sign the return. If someone else is the personal representative, he or she must also sign.
If you are claiming a refund as a surviving spouse filing a joint return with the deceased and you follow the above instructions, no other form is needed to have the refund issued to you. Please note: An Alabama refund of a deceased taxpayer cannot be issued to a third party.
Payment of Estimated Tax
Every individual who reasonably expects to owe at least $500.00 in tax in 2014 is required to file and pay estimated tax.
Note: If the TOTAL ESTIMATED TAX for 2014 is less than five hundred dollars ($500), an estimate is not required to be paid.
Alabama law provides for penalties if an estimate is due and is not paid, or is underpaid. The due dates for making estimated tax payments are the same as required by Federal Income Tax Law. Do not include payment of your estimated tax with the payment for tax due on your individual return because the quarterly voucher and remittance MUST be mailed separately. Additional instructions for filing your estimates are on the back of Form 40ES.
No refund will be made for any estimated taxes paid except when such amount is taken as a credit on an income tax return filed at the end of the taxable year by the payor or his authorized representative, or on an amended income tax return if the full amount paid is not claimed on the original income tax return.
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, 2014. 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, 2014.
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.
Setoff Debt Collection
If you owe money or have a delinquent account under any of the following public assistance programs, your refund may be applied to offset that debt:
- Any and all of the public assistance programs administered by the Alabama Department of Human Resources, including the Child Support Act of 1979, Chapter 10 of Title 38.
- Any and all of the assistance programs administered by the Alabama Medicaid Agency.
- Overpayment of unemployment compensation.
- Any and all court fees/fines owed to the Administrative Office of Courts.
If the Alabama Department of Human Re sources, Alabama Department of Industrial Relations, Alabama Medicaid Agency, or the Administrative Office of Courts notifies the Alabama Department of Revenue that you have a delinquent account in excess of $25, part or all of your refund may be applied to offset that debt. If you are married and filing a joint return, the joint refund may be applied to offset any of the above debts.
IMPORTANT: If you have been assessed taxes from a prior year, your current year refund will be applied to that debt even if the liability resulted from a jointly filed return.
Federal Refund Offset Program
Your 2013 Federal or State refund will be taken to satisfy any outstanding liabilities owed to the State of Alabama or to the Internal Revenue Service.