Arkansas Itemizing help

[cientax]

I am working on Arkansas tax return and wanting to itemize deductions. This is for a part year resident. Since the income is prorated for the part of year they lived in AR, would the itemized deductions also be prorated for the part of year that they lived in AR? There is no mention of this in the instructions. Thanks for your help.

[jjharrington]

The proration is done after the income and deductions. So take the full amount of itemized deductions and let the form prorate it out.

Hope this helps!

[cientax]

The proration is done after the income and deductions. So take the full amount of itemized deductions and let the form prorate it out.

Hope this helps!

I don't have the form in my tax program and I'm having to do the proation manually and I don't know if the itemized deductions must also be prorated. I only have three states in my program and Arkansas is not one of them and this is a new client. Thanks again.

[kcjenkins]

No, you do not prorate the deductions. You put in the federal income in col A and B and the state income in col C. Put all the itemized deductions in the return. The way AR does this is to calculate the tax on the total income, then take the proportional amount of tax, based on the ratio between AR income and total income. This happens on line 44D.

[kcjenkins]

Also, AR lets each spouse be taxed on their seperate income, which tax is then added together. So unless the spouse has less than 500 in income, it almost always benefits them to use Status 4. Be sure you try it both ways.

[MAMalody]

The proration due to non AR income takes place on line 44 of AR 1000NR.

[cientax]

Another question about the AR4. His Itemized deductions are far more than his income and there is no taxable income. Do I enter the entire amount of his federal and AR income as nontaxable Arkansas income on the AR4 (bottom section) and again on the AR1000NR line 56?

He also has some tax exempt income from Bureau of Public Debt and Social Security which is exempt from Arkansas tax . Do I also show this in AR4 as nontaxable AR income and line 56 of AR1000NR?

[MAMalody]

I would because Section III of the AR4 is the supporting information for line 56 with is only a memo entry for income not subject to AR income tax. I have had an AR client for a couple years, however, when I get stuck I check my NATP listing and contact an AR NATP member. If you are a member of any professional organization, you may want to look and see if they have this kind of service.

[kcjenkins]

Another question about the AR4. His Itemized deductions are far more than his income and there is no taxable income. Do I enter the entire amount of his federal and AR income as nontaxable Arkansas income on the AR4 (bottom section) and again on the AR1000NR line 56?

He also has some tax exempt income from Bureau of Public Debt and Social Security which is exempt from Arkansas tax . Do I also show this in AR4 as nontaxable AR income and line 56 of AR1000NR?

No, do not include all the federal income as nontaxable in the bottom section. That is only for explaining special items such as non-taxable dividends where, for example, you have an investment in mutual funds where some % is in AR investments, that are exempt in AR. In the case of a non-resident or PY resident, the difference between col A & B and Col C explains why it's not all taxable in AR. Only report down there items that are AR income, but are not taxable for some reason. If you look at the bunny hop for that section, you will see that it relates to the AR4, where the red memo at the top of the page tells you to make the adjustments on the federal interest or dividend input sheet.