10993: AZ - Form 301, Nonrefundable Individual Tax Credits and Recapture

If your client receives a “Tax Correction Notice” from the AZ Department of Revenue (DOR) that limits a claimed credit to the maximum allowable current-year contribution limit, review the client return to determine if a credit carryover from a prior year was used. If the DOR notice does not recognize the carryover, then you should contact the DOR to determine if the notice has been issued in error.

Part 1 of AZ Form 301 summarizes all non-refundable credit amounts, both current-year and available carryovers from prior years. For each credit, Part 1 displays in three columns:

• the current-year credit claimed (calculated on the form for the credit so as not to exceed any current-year limit)
• the available carryover (carryovers are tracked by the software, or can be entered on the screen for the credit)
• and the total available credit (the sum of current-year and available carryover)

Part 2 of Form 301 displays the tax credits and recapture amounts as well as any amount used in the current year for each credit.

Credit amounts flowing from Part 1 to Part 2 may be limited. Screen 301 and 3012 provide overrides for Part 2 of Form 301. See Help in each field (press F1) for information on the credit.

You may need to use the overrides to adjust the amount used on Part 2, if needed. Note: 

• Nonrefundable credits used in the current year cannot exceed tax liability.
• The credits are applied against tax liability in the order of the sequence shown on Part 2.
• You can use the overrides on screen 3012 to adjust Part 2 amounts to benefit your client.
  • For example, you can reduce use of credits earlier in the sequence to ensure a later credit is used.

See the AZ Credit Carryover Wks for credit and carryover use information.