Instructions to Alabama Income Tax 40 Form

Instructions to Alabama Income Tax Form 40.pdf Use this instructional guide when filling out the Alabama Income Tax 40.




Logonto“MyAlabamaTaxes”at andregister.
My Alabama Taxes (MAT) allows you to:
• File your tax return.
• Check the status of your refund.
(Nonregistered users can also access this feature.)
• View or print your recent tax returns.
• View your payment history.
• View or print any letters sent to you by the Alabama
Department of Revenue.
• Elect to have your 1099G sent electronically.
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Long Return Residents and Part-Year Residents Forms and Instructions
Address Change … 17
Addresses of Taxpayer Service
Centers … 2
Adoption Expenses … 16
Alabama Election Campaign Fund … 11
Alimony or SeparateMaintenance
Amount paid … 16
Amount received … 12
Amended Return … 17
Amount YouOwe … 12
Annuities … 14
Armed Forces,Members of … 4 and 5
Business Income or (Loss)
(Federal Schedule C and C-EZ) … 13
Business Use of Home … 20
Casualty and Theft Losses … 20
Consumer Use Tax … 10
Contributions to Charity … 19
Department of Revenue … 12 and 17
Credit for Taxes Paid to
Another State … 10 and 21
Credit for Taxes Paid to a Foreign Country … 10
Death of Taxpayer … 17
Dependents … 8 and 16
Direct Deposit … 16
Dividend Income … 8 and 21
Domicile … 4
Donation of Refunds … 12, 21 and 22
Educational Expenses … 20
Educational IRA… 14
Employee Business Expenses … 20
Employer-Sponsored Basic Skills Education Credit … 10
Estates and Trusts … 23
Estimated Tax … 11 and 17
Extension of Time to File … 18
FarmIncome and Expenses … 15
Federal Tax Deduction … 8
Figuring Your Income Tax … 10, 26-30
Filing Requirements —
When To File … 5
Which FormTo File … 5
WhoMust File … 5
Filing Status … 6
Forms, HowToGet … 24
Full EmploymentAct of 2011 Credit … 10
Gains … 13 and 22
General Information … 16
Head of Family … 6
Heroes for Hire Tax CreditAct of 2012 … 10
Income (Examples) —
YouMust Report … 7
You Do Not Report … 7
Income TaxWithheld (Alabama) … 8 and 11
Income Tax Deduction (Federal) … 8
Interest Income … 8 and 21
Interest — Late Payment of Tax … 17
Interest — Penalty on Early
Withdrawal of Savings … 15
Individual Retirement
Arrangement (IRA) … 13 and 15
Irrigation and Reservoir SystemCredit … 10
Itemized Deductions … 8, 18-21
Keogh Plan — Deduction for … 15
Long TermCare … 21
Losses … 13 and 22
Married Persons — Filing Joint or
Separate Return … 6
Medical and Dental Expenses … 18
Military Personnel —
Residents ofAlabama … 4
Nonresidents ofAlabama … 5
Moving Expenses … 16
Miscellaneous Itemized
Deductions … 20
Mutual Funds … 22
Name andAddress … 6
Nonresidents ofAlabama —
Which FormTo File … 5
WhoMust File … 5
Other Income … 8 and 12
Part-year residents … 5
Partnerships … 23
Payments —
Check/MoneyOrder … 12
Credit Card… 12
E-Check … 12
Penalty —
Criminal Liability … 17
Late Filing … 17
Late Payment of Tax … 17
Other Penalties … 17
Pensions … 14
Personal Exemption … 6 and 8
Preparer, Tax Return … 12
Records — How Long To Keep … 17
Refund Status… 3, 4 and 30
Refund,When Should I Receive? … 4
Rents and Royalties … 23
Requesting a Copy of Your
Tax Return … 17
Rollover Distributions … 13
Roth IRA… 13
RoundingOff toWhole Dollars … 7
Rural Physician Credit … 10
Salaries … 7
SchedulesA, B, CR, DC, D, and E
Instructions… 18-24
Self-employed health insurance … 16
Setoff Debt Collection … 4 and 18
Sign Your Return … 12
Single Person … 6
Social Security Number … 6
Standard Deduction … 8
Steps For Preparing Your Return … 5
Students and Dependents … 5
TaxAssistance for Taxpayers … 2
Tax Tables … 26-31
Wages … 7
Where To File Form40 … 12
Page 2
Addresses of District Taxpayer Service Centers
Alabama income tax assistancemay be obtained by calling or visiting any of theAlabamaDepartment ofRevenueTaxpayerServiceCenters listed below.Additional forms
and instructionsmay also be obtained fromthese centers. For refund information, call (800) 558-3912.
3300 Skyway Drive
P.O. Box 2929
Phone – (334) 887-9549
344 NorthOates St.
P.O. Box 5739
Phone – (334) 793-5803
235 College Street
P.O. Drawer 1190
Phone – (256) 547-0554
4920 Corporate Drive, Suite H
P.O. Box 11487
Phone – (256) 837-2319
955 Downtowner Blvd.
P.O. Drawer 160406
Phone – (251) 344-4737
2545 Taylor Road
P.O. Box 327490
Phone – (334) 242-2677
874 Reservation Road
P.O. Box 3148
Phone – (256) 383-4631
2020 Valleydale Road, Suite 208 (Hoover)
P.O. Box 1927
Phone – (205) 733-2740
518 19thAvenue
P.O. Box 2467
Phone –` (205) 759-2571Page 3
From The Commissioner…
Dear Taxpayer….
One of the primary goals of the Department of Revenue is to provide the most prompt and
efficient service. We are continuing to update our processing methods to enable us to make
progress toward this goal by using image technology to improve the processing of individual
paper returns. This requires all documents/pages to be printed and signed in black ink. If you
have documents that have been copied or faxed, please ensure that the resulting document is dark
enough to be scanned. You may also file electronically, which will further expedite the
processing of your return. Before you begin preparing your return, please check the “Which
Form to File” section on page 5 of these instructions to see which form you should use this year.
If you need additional forms, visit our Web site at
The Department of Revenue continues to make improvements to our system. I encourage all
taxpayers to use our online feature called “My Alabama Taxes.” This online feature allows
taxpayers to check the status of their refunds, view their accounts, and print copies of letters and
tax returns associated with their accounts. I am pleased to announce that all taxpayers can now
electronically file their Alabama income tax return free of charge using “My Alabama Taxes”.
For additional information, visit our Web site at Estimated tax
returns also can be filed electronically at no charge to you. You can pay your taxes online safely
and conveniently by E-check, ACH debit and credit card payments. (Please refer to page 12 for
further information.)
You can now elect to receive your tax refund via a prepaid debit card. To receive a debit card
just check the box on the refund line of your tax return or ask your tax preparer to check the box.
(Please refer to page 32 for further information.)
Please mail your completed return as early as possible. We welcome any comments and
suggestions you may have for any of our forms or instructions. Be sure to include your name,
address, and phone number should we have any questions for you.
If you need help in completing your return or if you have a question about your tax return, please
call or come by one of our Taxpayer Service Centers in your area. The addresses and phone
numbers are listed for your convenience inside the front cover of this booklet.
Thank you for your assistance.
Julie P. Magee
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What’s New For 2012?
MyAlabama Taxes –Anew feature on our Web site that will allow taxpayers to electronically file theirAlabama Tax returns free, viewany tax debts, payments, print copies of letters, print copies of their tax returns and change their
address. Go to and click on the link for “My Alabama Taxes” to register.
Electronic Filing –Receive yourrefund faster by electronically filing yourreturn.Electronic filing is nowavailable for non-residents. Visit ourWeb site, ortalk
to your preparer formore information.
Refund Status – For themost up-to-date information concerning the status
of your current yearrefund, call 1-800-558-3912 or check ourWeb site in the Individual Section. (See instructions page 30.)
Web Site – Check out our updated Web site at
for downloadable forms, fill-in-forms, instructions, and themost accurate up-todate information available. Our Web site also hosts links to PC on-line filing
providers supporting the Federal/State electronic filing program.
Prepaid Card – Taxpayers now have the option to have their refund issued
via a prepaidVISAdebit card. To qualify yourrefundmust 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.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 yourreturn, call ourVoiceRefund InquirySystem
(VRIS) at 1-800-558-3912 (see page 30 for details), or
complete FormIT:489.This formcan be obtained at our
web site
generaltaxforms.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 ortheDepartmentmay be unable to assist you.
Each year theAlabama Department of Revenue receives over 1.8million income tax returns.Of this number, over 1 million taxpayers receive refunds. The
Department 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 howyou file determines when you can expect your refund. For example,
electronically filed returns are received and processed
significantly fasterthan returns that aremailed to theDepartment ofRevenue.Also, if youmail 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
IncorrectName.Yourrefund checkwill be issued in
the name(s) appearing on yourreturn. If your name is illegible ormisspelled, your refund checkmay be issued
in the wrong name.
IncorrectAddress. Last year theU.S. Postal Service was unable to deliver thousands of refund 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
orincorrect social security numbers.Your social security
number is very important; it is used for identification of
yourfile.Please compare the number on yourreturnwith
the number on your social security card.
Showin 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
numberin the box headed “Your social security number,”
and enterthe 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 check will be
issued in the correct name.
Legibility.Onmany returns, the name, address, or
social security number is not readable. If this happens,
thewrong informationmay be recorded, and yourrefund
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.
TheDepartmentwill considerthe return incomplete if all
required information is not included.
IncorrectComputation.Many returnsmust be corrected each year by theDepartment due to simplemath
errors. Beforemailing your return, double check the addition and subtraction tomake sure themath is correct.
This is a good idea even if someone else prepares your
Misdirected Mailing. Each year thousands of returns aremailed to the InternalRevenueService instead
of theAlabama Department of Revenue. Use the envelope you received with this booklet or follow themailing
instructions on your return.
FilingMore 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
priorto 2008 youmust fileForm40X,AmendedAlabama
Income Tax Return. For a 2012 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 theDepartment.Before
we can process them, these returns must be returned
to the taxpayers for signatures. If a joint return is filed,
both spousesmust sign the return.
Other Reasons
For Refund Delays
You Have Not Paid All Taxes Due From a PreviousYear. If you owe tax for a prior year, yourrefundwill
be applied to pay that deficiency. Any amount remainingwill be refunded to you.Thiswill generally delay your
refund 12 weeks ormore.
SetoffDebtCollection. If theAlabamaDepartment
of Human Resources, the Alabama Department of IndustrialRelations, theAdministrativeOffice ofCourts, or
theAlabamaMedicaidAgency has notified theAlabama
Department ofRevenue that your account is delinquent
on a debtrepayment, any public assistance program(including the Child SupportAct of 1979, Chapter 10, Title
38), or any Medicaid assistance program, your refund
will be applied to that debt.Note: See SetoffDebtCollection on page 17 for further information.
FederalRefundOffsetProgram.Your 2012 federal
or state refundwill be taken to satisfy any outstanding liabilities owed to the State ofAlabama or to the Internal
Revenue Service.
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 usuallymeansmoney, goods, and property you received on
which youmust pay tax. It does not include nontaxable
benefits.See page 7 of the instructions to find outwhich
types of income you should include.
Other Filing Requirements
Refunds. Even if your gross income was less than
the amounts shown, youmust file a return to get a refund
if Alabama income tax was withheld fromany amounts
paid to you.
Domicile. Individuals who are domiciled in (or residents of) Alabama are subject to tax on their entire incomewhether earnedwithin orwithoutAlabama.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. Domicilemay 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 inAlabama.
If anAlabama resident accepts employment in a foreign country for a definite orindefinite period of timewith
the intent ofreturning to theUnitedStates, the individual
remains anAlabama resident and all income, wherever
earned, is subject to Alabama income tax. This is true
even if the taxpayer leaves no property inAlabama.
If a citizen of a foreign country comes toAlabama 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
otherwords, a foreign citizen domiciled inAlabama is liable forAlabama income tax on income earned fromall
MilitaryPersonnel(Residents).Military personnel,
whose legal residence is Alabama, are subject to Alabama income tax on all income regardless of the source
orwhere earned unless specifically exempt byAlabama
Military personnel (Army, Navy, Marine, Air Force,
MerchantMarine, andCoastGuard)whowere residents
of Alabama upon entering military service remain residents ofAlabama forincome 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
How To Use This
Instruction Booklet
The instructions for Form 40 are divided into
fivemain sections.
Section 1 contains information on who
must file, how to choose the correct form, and
when to file a return.
Section2 contains useful steps to help you
prepare your return.
Section 3 contains specific instructions for
most of the lines on your return.
Section 4 contains general information
about such items as amending your tax return,
howlong to keep records, and filing a return for a
deceased person.
Section 5 contains instructions for completing Schedule A for those taxpayers itemizing
their deductions.Also included are instructions for
Schedules B, CR, DC, D, and E.
If you follow the steps in Section 2 and the
specific instructions in Section 3, you should be
able to fill in your return quickly and accurately.
Page 4Sailors’ Civil Relief Act, military personnel are not
deemed to have lost their permanent residence in any
state solely because they are absent in compliancewith
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 ofmilitary orders. If the husband andwife
are both inmilitary service, each could be a resident of
a different state undertheSoldiers’andSailors’CivilRelief Act. A spouse not in military service has the same
domicile as themilitary spouse unless proven otherwise.
Military Personnel (Nonresidents). Nonresident
military personnel merely having a duty station within
Alabama (whose legalresidence is notAlabama) are not
required to file anAlabama income tax return unless they
have earned income fromAlabama sources other than
military pay. If they have earned income in Alabama
otherthanmilitary pay, they are required to fileAlabama
Form40NR.Amarried nonresidentmilitary person with
income earned inAlabamamay file either a separate return claiming himself or herself only, or a joint return
claiming the total allowable personal exemption. The
“MilitarySpousesResidencyReliefAct”(Public Law111-
97) states that the income for services performed by the
spouse of a servicemember shall not be deemed to be
income for services performed or fromsources 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 servicemember 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 claima dependent exemption if they providedmore
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,
2013, but no laterthanApril 15, 2013. 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 returnwill 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 untilOctober 15,
2013. 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 byApril 15, 2013.
Except in caseswhere taxpayers are abroad, no extension will be granted formore than 6months.
An extension means only that you will not be assessed a penalty forfiling yourreturn afterthe due date.
Interest on the additional tax due from the due date of
the return and any penaltieswill be assessed if applicable to your return.
Originalreturnsmust be filedwithin 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
YouMAYUse Form 40AIf YouMeet
ALL The Following Conditions:
You were a resident of Alabama for the entire
You do not itemize deductions.
You do not claim any adjustments to income,
such as an IRAdeduction, alimony paid, Federal income
tax paid for a prior year, etc.
You do not have income fromsources otherthan
salaries and wages except for interest and dividend income which cannot exceed $1500.00.
You are not claiming income or loss fromSchedules C, D, E, or F.
You are not claiming credit for taxes paid to another state.
YouMUST Use Form 40 If:
You were a full or part-year resident ofAlabama
and do not meet ALL of the requirements to file Form
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 Liabilitymust be prorated by applying a percentage
ofAlabama adjusted gross income to Federal adjusted
gross income in orderto calculate the amount deductible
on line 12 of Form40.Part-yearresidents are allowed to
deduct the full standard deduction, personal, and dependent exemptions.
YouMUST Use Form 40NR If:
You are not a resident of Alabama and you received taxable income fromAlabama sources orfor performing serviceswithinAlabama and your gross income
fromAlabama sources exceeds the allowable prorated
personal exemption.Nonresidentsmust prorate the personal exemption. If yourAlabama gross income exceeds
the prorated amount, a returnmust be filed.
YouMUST 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 fromAlabama
sourceswhile 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
nonresidentreturn.The part yearresidentreturn 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.
Steps for Preparing
2 Your Return
By following these four useful steps, and reading the
specific instructions, you should be able to prepare your
return quickly and accurately.
Step 1
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
FormW-2 by February 1,ORif the one you receive is incorrect, please contact your employer as soon as possible.Only your employer can give you a FormW-2, and
only he or she can correct it.
If you have someone prepare your return for you,
make sure that person has all yourincome and expense
records so he or she can fill in your return correctly.Remember, if someone else prepares your return incorrectly — you are stillresponsible.
Page 5
You Must File A Return If…
Youwere a: and your marital status at the end of 2012was: and yourfiling status is: and your gross incomewas at least:
Single (including divorced and legally separated)
Single $ 4,000
Full Year Head of family $ 7,700
Resident Married and living with your spouse at the end Married, joint return $10,500
of 2012 (or on the date your spouse died) Married, separate return $ 5,250
Single (including divorced and legally separated)
Single $ 4,000 (while anAlabama resident)
Part Year Head of family $ 7,700 (while anAlabama resident)
Resident Married and living with your spouse at the end Married, joint return $10,500 (while anAlabama resident)
of 2012 (or on the date your spouse died) Married, separate return $ 5,250 (while anAlabama resident)
Single (including divorced and legally separated) Single or head of family
Over the allowable prorated exemption:
Nonresident Married and living with your spouse at the end Married, joint return
See above page for further instructions.
of 2012 (or on the date your spouse died) Married, separate returnStep 2
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
yourreturn, look it overto see if you needmore forms or
If you think you will need any other forms, get them
before you start to fill in your return. Our Alabama TaxpayerServiceCenters (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 ourWeb site
Step 3
Sign and date yourreturn.
Form40, 40A, or 40NRis 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.
Step 4
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 Form40.
If you need more space on forms or schedules, attach separate sheets and use the same format as
printed forms, but showyourtotals 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.
Beforemailing your return, check tomake sure you
have retained an exact copy for yourrecords. If you owe
tax, be sure to include your payment and Form40Vwith
your return.
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 theP.O. box numberinstead of your street
Social Security Number
Each year thousands of taxpayers file returns using
an incorrect social security number.Usually this number
belongs to anothertaxpayer. 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 beloware a fewof the common reasons why a social security number is reported
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 aremarried 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
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 spousemust 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 beforeApril 15.
IMPORTANT: Please notify the Social Security Administration (SSA) immediately in the event you have
changed your name because ofmarriage, divorce, etc.,
so the name on yourtax return is the same as the name
theSSAhas 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 yourfiling 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, 2012
you were unmarried or separated fromyour spouse either by divorce or separatemaintenance 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 jointreturn. If you file a jointreturn, youmust
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 jointreturn 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, 2012 even if you
did not live together for the entire year. Both of you are
responsible for any tax due on a jointreturn, so if one of
you does not pay the othermay have to.
Note:If you file a jointreturn, youmay not, afterthe due
date of the return, choose to file separate returns forthat
If your spouse died in 2012, you can file a jointreturn
for 2012. You can also file a joint return if your spouse
died in 2012 before filing a 2012 return. For details on
howto file a jointreturn, seeDeath ofTaxpayer on page
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 notmarried 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, 2012 you were unmarried or legally separated andmeet either test 1 or 2 below.
Test 1.You paidmore than halfthe cost of keeping
up a home for the entire year provided that the home
was themain home of your parentwhomyou can claim
as a dependent.Your parent did not have to livewith you
in your home,
Test 2.You paidmore than halfthe 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):
a. Your unmarried child, grandchild, great-grandchild, etc., adopted child, or stepchild. This child does
not have to be your dependent.
b. Your married child, grandchild, great-grandchild,
etc., adopted child, or stepchild.This childmust 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.
c.Any relativewhomyou can claimas a dependent.
(See definition of dependent on page 8.)
If the person forwhomyou kept up a homewas born
or died during the year, you may still file as “Head of
Family”if the homewas that person’smain home forthe
part of the year he or she was alive.
Special Rules
A nonresident taxpayer who receives income from
Alabama sources or for performing services withinAlabama andwho also had incomewhile a resident ofAlabama during the same tax year must file both the
Alabama Nonresident Form 40NR and the Alabama
Part-year resident Form40. If you are required to file
both returns, the total personal exemption and the
dependent exemption must be claimed on the partyearreturn (Form40).No personal exemption or dependent exemption can then be claimed on the
nonresidentreturn (Form 40NR).
Page 6Income
All income is subject toAlabama 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 fromsales
ofreal estate, stocks, or bonds.Military pay is taxable income except for compensation received for active service in a designated combat zone.
Examples of Income
YouMUST Report
The following kinds of income should be reported on
Forms 40, 40A, or 40NR and related forms and
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, accountswith savings and loan associations,
mutual savings banks, credit unions, etc. (Schedule B).
Original Issue Discount (Schedule B).
Distributions from an Individual Retirement
Arrangement(IRA)includingSEPs andDECs, 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 aremore 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
Life insurance proceeds froma policy you cashed
if the proceeds aremore than the premiumyou paid.
Profits frombusinesses and professions (Federal
Schedule C or C-EZ).
Your share of profits frompartnerships andSCorporations (Schedule E).
Profits fromfarming (Federal Schedule F).
Pensions and annuities otherthan those listed in
“Examples of Income You DONOTReport.”
Lump-sumdistributions, endowments.
Gains from the sale or exchange (including
barter) ofreal 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
Prizes and awards (contests, lotteries, and gambling winnings).
Income fromsources 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
Property transferred in conjunctionwith performance of services.
Jury duty pay.
Examples of Income
You DONOT Report
(Do not include these amountswhen deciding if you
must file a return.)
United States Retirement Systembenefits.
State of Alabama Teachers’ Retirement System
State ofAlabamaEmployees’RetirementSystem
State of Alabama Judicial Retirement System
Military retirement pay.
Tennessee Valley Authority Pension System
United States Government Retirement Fund
Payments from a “Defined Benefit Retirement
Plan” in accordance with IRC 414(j). (Contact your retirement plan administrator to determine if your plan
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’sAdministration.
Workman’s compensation benefits, insurance
damages, etc., for injury or sickness.
Child support.
Gifts,money, or other property you inherit orthat
was willed to you.
Dividends on veteran’s life insurance.
Life insurance proceeds received because of a
person’s death.
Interest on obligations of theState ofAlabama or
any county, city, ormunicipality ofAlabama.
Interest on obligations of theUnitedStates 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 weremore than the cost
of your normal expenseswhile living in your home.(You
mustreport as income reimbursements for normal living
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 ofAlabama.
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 fromany
Alabama police retirement system.
Death benefits received by a designated beneficiary of a peace officer or fireman killed in the line of
Income earned while serving as a foreign missionary after first serving 24months as amissionary 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 thePresident of theUnited
An amount up to $25,000 received as severance,
unemployment compensation or termination pay, or as
income froma supplemental income plan, or both, by an
employee who, as a result of administrative downsizing, is terminated, laid-off, fired, or displaced fromhis
or her employment, shall be exempt fromstate income
tax. If the exempt severance pay is included in your
statewages, contact your employerfor a corrected
Beginning January 1, 1998, all benefits received
fromAlabama Prepaid Tuition Contracts (PACT).
Alabama 529 savings plan.
Income received fromtheDepartment ofDefense
as a result of amember of themilitary killed in action in
a designated combat zone.
Any income earned by the spouse in the year of
death of amember of theMilitarywho has been killed in
action in a designated combat zone.
RoundingOff toWhole Dollars
Round off cents to the nearest whole dollar on your
return and schedules. You can drop amounts under 50
cents. Increase amounts from50 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”
showthe amount ofwages youwere paid before taxes,
insurance, etc. were deducted. You should use the
amount shown in the box headed “StateWages” 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 hadmore 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 5awrite “SeeAttached 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 forfederal 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 theAlabama return.
Part-year Residents. If you were a resident ofAlabama for only a part of the year, enter only the income
earned during the period of residence inAlabama.
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
If you are deducting business expenses as a statutory employee,report the amount shown inBox 1 of your
W-2 formand your expenses on Schedule C. If you are
not deducting business expenses, report your income
on line 5.
Page 7Alabama Income TaxWithheld
In the column headed “Alabama taxwithheld,” enter
the amount ofAlabama 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
Note:Do not change or alterthe amount of taxwithheld
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 notinclude the following asAlabama income tax:
Federal income tax,
FICAtax (Social Security andMedicare),
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 theAlabama income tax withheld together and
enter on line 22.
Line 6
Interest and Dividend Income
Enter your TOTAL taxable income frominterest and
dividends. If the total taxable and nontaxable interest
and dividends you received in 2012 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 Form1099-INT, Form
1099-OID, or 1099-DIV, if applicable, showing interest or
dividends youmust report.
To seewhat interest and dividends are taxable,read
the instructions for Schedule B in this booklet.
Line 7
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 fromsale of property, items
not included in “State wages” box onW-2 forms, etc.
SeeExamplesofIncomeYouDONOTReport and
Examples of Income YouMUST 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 2012 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 ofForm40.Also, if any additional tax
was paid to the IRS in 2012, 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
Line 9
Adjustments to Income
If youmade payments to a traditional IndividualRetirementArrangement(IRA) orto aKeogh plan, youmay
be entitled to claimthese payments as an adjustment to
Also deductible as an adjustment to income are
penalties you incurred for the early withdrawal of interest beforematurity.
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 andmedical expenses paid orincurred
in the adoption of a minor are deductible as an adjustment to income.
Employees and self-employed personsmay deduct
certainmoving expenses.The newjob locationmust be
within the state ofAlabama.
Self-employed personsmay deduct health insurance
premiums to the same extent as allowed for federal
For more information on the above exclusions,
please see the instructions for Part II on page 15.
The total adjustments to income fromline 11,Part II,
should be entered on line 9, page 1.
Line 10
AdjustedGross 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
Youmay elect to itemize your deductions formedical
expenses, interest, contributions, taxes, etc., OR you
may claim the Standard Deduction, but you cannot
If you elect to claimtheStandardDeduction on your
2012 Alabama return and it becomes necessary to
change to itemized deductions, youmay do so by filing
an amended return. You should figure your deduction
both ways, and claim the one that gives you the larger
If you are married and filing separate Alabama returns, both spouses must itemize their deductions or
bothmust claimthe Standard Deduction. Each spouse
may claimonly the itemized deductions he/she actually
paid. See the instructions for ScheduleAfor items that
may be claimed as itemized deductions.
Part-yearresidents ofAlabamamay claimonly 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 ScheduleA.
StandardDeduction. If you elect to claimtheStandard 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 2012 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, theremay have been changes to Federal forms after our print deadline and the line numbers
referenced for ourformsmay 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 SeparateAlabamaReturns, or
PartYearResidents. If amarried couple elects to file a
joint federal return and separate Alabama returns, or if
filing as a part year resident, the federal income tax liabilitymust be determined by a ratio ofAlabama 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 fromline 1, 2, 3, or 4.
Note:Part yearresidents are allowed the full exemption
amount.Adependent or studentmay take the personal
exemption even if claimed as a dependent by someone
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
fromthe taxpayer during the tax year and is also related
to the taxpayer in one of the following relationships:
Son Stepfather
Daughter Mother-in-law
Stepson Father-in-law
Stepdaughter Brother-in-law
Legally adopted child Sister-in-law
Parent Son-in-law
Grandparent Daughter-in-law
Grandchild If related by blood:
Brother Uncle
Sister Aunt
Stepbrother Nephew
Stepsister Niece
Note: You cannot claim a foster child, friend, cousin,
yourself, or your spouse as a dependent underAlabama
Birth or Death of Dependent. You can take an exemption for a dependentwhowas born orwho died during 2012 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 2012. If you file a jointreturn, the
support can be from you or your spouse. You cannot
claimcredit on anAlabama 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, youmust includemoney the
dependent used for his or her own support even if this
moneywas not taxable (for example: gifts, savings,welfare benefits). If your childwas 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 claimyour child and/or otherindividuals as your dependent, you must complete Part III on
page 2. The amount entered on page 2, Part III, line 2,
Page 8Page 9
Federal Income Tax Deduction Worksheet
1 Enter the tax as shown on line 55, Form1040, line 35 on Form1040A,
line 10 on Form1040EZ or line 52 on Form1040NR……………………………………………………..
2 a Earned income credit (EIC). Enter the amount fromline 64a, Form1040,
line 38a on Form1040Aor line 8a on Form1040EZ …………………………
b Additional child tax credit. Enter the amount fromline 65, Form1040,
line 39 on Form1040A, or line 63 on Form1040NR …………………………
c AmericanOpportunity Credit.
Enter the amount fromline 66, Form1040 or line 40 on Form1040A …………….
d Credits from Forms 2439, 8801, 8885.
Enter the amount fromline 71, Form1040 or line 67 on Form1040NR……………
3 Add lines 2a, b, c and d…………………………………………………………………………..
4 Subtract line 3 fromline 1 and enter on line 12 on Form40, line 9 Form40Aor
line 4, Part IV, page 2 on Form40NR. If amount is negative enter zero. ……………………………………..
ColumnA Column B Column C
Tax Due –
(Multiply ColumnA
Total Purchase Price Tax Rate by Column B)
1. All purchases EXCEPT automotive vehicles and farmmachinery ………….. .04
2. ATVs, off-roadmotorcycles, riding lawnmowers, self propelled construction
equipment and other automotive vehicles that are not titled or registered by
the county licensing official ………………………………………. .02
3. Farmmachinery or equipment and replacement parts thereof ……………… .015
4. TOTAL TAX DUE (Total of Column C). Carry this amount to Form 40 Line 19b……………………………………
Standard Deduction
Married Filing Joint Married Filing Separate Head of Family Single ____________________________ ____________________________ ____________________________ ____________________________
ALAdjustedGross Standard ALAdjustedGross Standard ALAdjustedGross Standard ALAdjustedGross Standard
Income (AL Line 10) Deduction Income (AL Line 10) Deduction Income (AL Line 10) Deduction Income (AL Line 10) Deduction
0 – 20,499 7,500 0 – 10,249 3,750 0 – 20,499 4,700 0 – 20,499 2,500
20,500 – 20,999 7,325 10,250 – 10,499 3,662 20,500 – 20,999 4,565 20,500 – 20,999 2,475
21,000 – 21,499 7,150 10,500 – 10,749 3,574 21,000 – 21,499 4,430 21,000 – 21,499 2,450
21,500 – 21,999 6,975 10,750 – 10,999 3,486 21,500 – 21,999 4,295 21,500 – 21,999 2,425
22,000 – 22,499 6,800 11,000 – 11,249 3,398 22,000 – 22,499 4,160 22,000 – 22,499 2,400
22,500 – 22,999 6,625 11,250 – 11,499 3,310 22,500 – 22,999 4,025 22,500 – 22,999 2,375
23,000 – 23,499 6,450 11,500 – 11,749 3,222 23,000 – 23,499 3,890 23,000 – 23,499 2,350
23,500 – 23,999 6,275 11,750 – 11,999 3,134 23,500 – 23,999 3,755 23,500 – 23,999 2,325
24,000 – 24,499 6,100 12,000 – 12,249 3,046 24,000 – 24,499 3,620 24,000 – 24,499 2,300
24,500 – 24,999 5,925 12,250 – 12,499 2,958 24,500 – 24,999 3,485 24,500 – 24,999 2,275
25,000 – 25,499 5,750 12,500 – 12,749 2,870 25,000 – 25,499 3,350 25,000 – 25,499 2,250
25,500 – 25,999 5,575 12,750 – 12,999 2,782 25,500 – 25,999 3,215 25,500 – 25,999 2,225
26,000 – 26,499 5,400 13,000 – 13,249 2,694 26,000 – 26,499 3,080 26,000 – 26,499 2,200
26,500 – 26,999 5,225 13,250 – 13,499 2,606 26,500 – 26,999 2,945 26,500 – 26,999 2,175
27,000 – 27,499 5,050 13,500 – 13,749 2,518 27,000 – 27,499 2,810 27,000 – 27,499 2,150
27,500 – 27,999 4,875 13,750 – 13,999 2,430 27,500 – 27,999 2,675 27,500 – 27,999 2,125
28,000 – 28,499 4,700 14,000 – 14,249 2,342 28,000 – 28,499 2,540 28,000 – 28,499 2,100
28,500 – 28,999 4,525 14,250 – 14,499 2,254 28,500 – 28,999 2,405 28,500 – 28,999 2,075
29,000 – 29,499 4,350 14,500 – 14,749 2,166 29,000 – 29,499 2,270 29,000 – 29,499 2,050
29,500 – 29,999 4,175 14,750 – 14,999 2,078 29,500 – 29,999 2,135 29,500 – 29,999 2,025
30,000 and over 4,000 15,000 and over 2,000 30,000 and over 2,000 30,000 and over 2,000
Alabama Use Tax Worksheet
Report 2012 purchases for use inAlabama fromout-of-state sellers
on which tax was not collected by the seller.should be entered on line 14, page 1.
Use the following chart to determine the per-dependent exemption amount.
Amount on Dependent
Line 10, Page 1 Exemption
0 – 20,000 1,000
20,001 – 100,000 500
Over 100,000 300
Line 17
Figuring Your Tax
Youmust figure yourtax fromthe Tax Tables unless
you are claiming a carryover or carrybackNetOperating
Loss fromanother 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.
Line 18
Credit for Taxes Paid toAnother State. Youmust
complete Schedule CR and you must attach a copy of
other state’s return orW-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 ofAlabama filing Form40who have income fromsources 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 claimthis credit only if the returns filed
with Alabama and the other state cover the same periods. If you are claiming creditfortaxes paid tomore
than one state you must make a separate computation for each state using the Schedule CR Worksheet.
If the state forwhich you are claiming a credit allows
for credits instead of personal exemptions, call (334)
242-1000 forfurtherinformation in converting this credit
forAlabama purposes.
No credit is allowablewhen the income fromsources
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 inAlabama.An example of
this situation is shown in the booklet in the instructions
for Schedule CR on page 21.
Forfurtherinformation read the instructions for
Schedule CR on page 21.
Schedule OC. Schedule OC must be completed if
you are claiming an employer-sponsored basic skills education credit, rural physician credit, coal credit, and/or
a capital credit.
Basic Skills Education Credit is available to employerswho provide basic skills education programs approved by the Alabama Department of Education to its
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,
AlabamaEnterprise ZoneActCredit.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 incentiveswere enacted byActNo. 87-573 of the
Alabama Legislature and signed into law on July 22,
1987 as the “Alabama Enterprise ZoneAct.”
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
If a credit is earned by a partnership orScorporation,
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 ZoneAct” and the necessary forms to claimthis
credit, you should contact:
Alabama Department of Economic
and CommunityAffairs
Development Division
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 creditwas enacted byAct 95-187 of theAlabama
Legislature and signed into lawon 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
(334) 242-1000
Full EmploymentAct of 2011 Credit
This credit is available to small business that creates
newjobs payingmore than ten dollars per hour.Asmall
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 duringwhich the employee has completed 12 months of consecutive employment. The
employermust 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, overthe number employed inAlabama 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 forwhich a credit is sought by one employee for each newly hired employee forwhoma credit
is being sought for the current year, plus one employee
for all employees forwhomcreditswere claimed in prior
Heroes forHire TaxCreditAct of 2012 Employee
This credit is available to small businesses that hire
recently deployed and nowdischarged 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 CreditAct of 2012.
Heroes for Hire Tax CreditAct 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 veteranmust hold at least 50 percent ownership interest in
the business which must be located in Alabama and
showa net profit of at least $3,000 for the year inwhich
the credit is taken. The recently deployed unemployed
veteran is not allowed to claimthis credit if an employer
has claimed a hire credit for him or her under the Heroes for Hire Tax CreditAct of 2012.
Qualified Irrigation System/Reservoir System
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 fromfuel 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
computedwithoutregard to the credit.Taxpayers can either take a credit for an irrigation systemor 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.Aqualified reservoir is an off-streamupland reservoir used as
a source ofwaterforirrigation by an agricultural trade or
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
usingAlabama tax rates on the taxpayer’s proportionate
share of the entity’s income derived from the foreign
country whichever is less.
Line 19b
Consumer Use Tax
Reviewthe purchases youmade during 2012. 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
Use tax is the counterpart of the sales tax.State use
tax is imposed at the same rate and on the same type of
Page 10transactions as sales tax and is due fromthe consumer
when the sales tax is not collected.When you purchase
merchandise from a retail store or other business establishment inAlabama, 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 inAlabama and the retail seller does not collect tax on the purchase, youmust
report and pay consumer use tax on the purchase price.
Usually, these purchases aremade fromcatalogs, over
the internet, or by telephone and include items such as:
Computer Software
Magazine Subscriptions
Electronic Equipment
CDs, DVDs,Audio & Video Cassettes
Photographic Equipment
Musical Equipment
AutomotiveAccessories and Parts
Lawn and garden equipment
Applicable State Use Tax Rates
The general use tax rate of 4% applies to all purchases ofmerchandise, exceptwhere a differentrate 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 newor used vehicle purchased less the credit forthe
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 orregistered in the calculation on
theworksheet below.Youmustreport 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
usedmachinery or equipment taken in trade.
LocalUseTax:City andCounty use taxmay 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
You can use eithertheAlabamaUseTaxTable 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 computeAlabama Use Tax. Formore 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 spousemay contribute $1 to
either party. If youmake a voluntary contribution to this
fund it WILL INCREASE your tax by the amount of the
The total amount entered on line 20a or 20b cannot
exceed $2 for amarried couple filing a joint return or $1
for all other filers.
Line 22
Alabama Income TaxWithheld
Enter the total Alabama income tax withheld as
shown on lines 5a thru 5d.
Line 23
2012 Estimated Tax Payments/
Automatic Extension Payment
Enter on this line any payments you made on your
estimatedAlabama income tax (Form40ES)for 2012 or
automatic extension (Form40V).
The amount shown on line 27 of your 2011 Form
40. This is the balance you owed for the tax year 2011,
and cannot be claimed as paid on your 2012 estimated
tax even though you paid it in 2012.
Any overpayment from 2011 that was refunded
to you.
If you and your spouse paid joint estimated tax but
are nowfiling separateAlabama income tax returns, either of you may claim all of the amount paid, OR you
can each claima part of it. Please be sure to showboth
social security numbers on the separate returns. If you
and your spouse paid separate estimated tax but are
nowfiling a joint income tax return, add the amounts you
each paid.
These instructions also apply if your spouse died
during the year.
NameChange. If you changed your name because
ofmarriage, divorce, etc., and youmade estimated tax
payments using yourformer name, attach a statement to
Form 40 explaining all the payments you and your
spousemade in 2012 and the name(s) and social security number(s) under which youmade the payments.
Caution:It is very important that the social security numbers be the same on your currentreturn, yourlast 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 paymentmadewith your originalreturn and/or billing notices and amended returns(s).
Line 26
Previous Refund
This line is for amended returns only. Enter the
amount of your previous refund fromyour originalreturn
and amended return(s).
Page 11
Alabama Use Tax Table
for General Internet
and Catalog Purchases
Purchases Subject to Use Tax
At least But less than Use TaxDue
0 …….. 50 …….. 1
50 …….. 100 …….. 3
100 …….. 150 …….. 5
150 …….. 200 …….. 7
200 …….. 250 …….. 9
250 …….. 300 …….. 11
300 …….. 350 …….. 13
350 …….. 400 …….. 15
400 …….. 450 …….. 17
450 …….. 500 …….. 19
500 …….. 550 …….. 21
550 …….. 600 …….. 23
600 …….. 650 …….. 25
650 …….. 700 …….. 27
700 …….. 750 …….. 29
750 …….. 800 …….. 31
800 …….. 850 …….. 33
850 …….. 900 …….. 35
900 …….. 950 …….. 37
950 …….. 1,000 …….. 39
1,000 …….. 1,050 …….. 41
1,050 …….. 1,100 …….. 43
1,100 …….. 1,150 …….. 45
1,150 …….. 1,200 …….. 47
1,200 …….. 1,250 …….. 49
1,250 …….. 1,300 …….. 51
1,300 …….. 1,350 …….. 53
1,350 …….. 1,400 …….. 55
1,400 …….. 1,450 …….. 57
1,450 …….. 1,500 …….. 59
1,500 …….. 1,550 …….. 61
1,550 …….. 1,600 …….. 63
1,600 …….. 1,650 …….. 65
1,650 …….. 1,700 …….. 67
1,700 …….. 1,750 …….. 69
1,750 …….. 1,800 …….. 71
1,800 …….. 1,850 …….. 73
1,850 …….. 1,900 …….. 75
1,900 …….. 1,950 …….. 77
1,950 …….. 2,000 …….. 79
2,000 …….. 2,050 …….. 81
2,050 …….. 2,100 …….. 83
2,100 …….. 2,150 …….. 85
2,150 …….. 2,200 …….. 87
2,200 …….. 2,250 …….. 89
2.250 …….. 2,300 …….. 91
2,300 …….. 2,350 …….. 93
2,350 …….. 2,400 …….. 95
2,400 …….. 2,450 …….. 97
2,450 …….. 2,500 …….. 99
If purchases are over $2,499 use theAlabama Use
TaxWorksheet on page 9Line 28
Amount YouOwe
(If line 21 is largerthan line 27)
Subtract line 27 fromline 21, and enter the amount
on line 28 – this is the amount you owe the State ofAlabama. Itmust be paid using Form40V.
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 “2012 Form 40,” and
remit your payment with Form40V.
ElectronicBankDraft(E-Check):You can pay your
taxes due electronically from your bank account online
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 forthis 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 Jurisdiction Code 1100. You can also
pay your taxes by credit card online at https://www.
ALTaxPayment.comor by phone at 1-866-272-9829 or
by visiting Value Payment Systems at®,MasterCard®,
Visa®andAmericanExpress®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.
Howdo I pay byACH Debit?
You may pay by ACH Debit by going to Do not use
Form40V 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
If you are paying with funds on a foreign bank
you must include an additional $25 exchange fee.
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
returnwithout payment, a final assessmentmay be entered by the Department. A final assessment which is
not appealed is as conclusive as a judgment of a circuit
court.TheDepartmentmay then proceedwith 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 bySections 40-1-2, 40-2-11(16), and 40-29-
23, Code ofAlabama 1975.
Line 29
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.Youmay need to complete
Form2210AL. See page 31, “How toObtain Forms.”
Line 30
(If line 27 is largerthan line 21)
Subtract line 21 fromline 27, and enter the amount
on line 30 – this is the amount you overpaid.
Note: The Alabama Department of Revenue will issue
you a Form1099-Gfor the overpayment amount.
If you elect to itemize deductions on your 2012 Federal return and claim a deduction for Alabama Income
Tax paid in 2012, the amount shown on line 28 should be
reported as income on your 2013 Federal return.
Line 31
Applied to 2013 Estimated Tax
Youmay elect to credit all or part of the overpayment
shown on line 30 to your 2013 estimated tax. (Place
amount on line 31.)
Once an election ismade to apply this overpayment
to your 2013 estimated tax, it cannot later be refunded
to you or applied to pay additional tax for 2012. The
amount entered on this line can only be claimed as a
credit on your 2013Alabama return.
Line 32
Donation of Refunds
Enter amount fromline 2, Schedule DC. (See page
Youmay elect to donate all or part of your overpayment, as shown on line 30, page 1, to one or more of
the funds as provided by theAlabama Legislature. The
amounts entered on these lines will be paid to the programs you indicate.Any amount you contributemay be
claimed as an itemized deduction when you file your
2013Alabama Income TaxReturn. (Caution:When reporting your refund on your 2013 Federal return, you
should report the amount of overpayment shown on line
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
theDepartment, the amount contributed cannot be used
to pay any additional tax due.
Line 33
Refunded to You
Subtract the amounts on lines 31 and 32 from the
amount on line 30. You should receive a check for the
overpayment. If you prefer you can elect to receive your
refund on 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? andCommonMistakes ThatDelayRefunds
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 jointreturn. 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
UseOnly area should remain blank.Someonewho prepares your return but does not charge you should not
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 aboutwhether a prepareris required
to sign a return, please contact an Alabama Taxpayer
Service Center.
The preparer required to sign your returnMUST:
Sign in the space provided forthe preparer’s signature.(Signature stamps orlabels are not acceptable.)
Give you a copy of yourreturn for yourrecords in
addition to the copy to be filed with the Alabama Department of Revenue.
BEFORE signing and mailing your return you
should review it tomake sure the preparer has entered
the correct name(s), address, and social security number(s)in the spaces provided and reported all of yourincome. REMEMBER, you are responsible for the
information on yourreturn 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 preparerinstead, please give permission to do so by checking the box above the signature line.
Where To File
Use the envelope that camewith yourreturn.We encourage the use of this envelope since it will expedite
the processing of your return and suggest that the address not be completed until you have completed your
return. The envelope should be addressed in accordance with one of the following examples:
If you are notmaking a payment,mail yourreturn to:
Alabama Department of Revenue
P.O. Box 154
Montgomery,AL 36135-0001
If you aremaking a payment,mail yourreturn, Form
40V and payment to:
Alabama Department of Revenue
P.O. Box 2401
Montgomery,AL 36140-0001
Only your 2012 Form40 return should bemailed to
one of the above addresses. Prior year returns,
amended returns, and any correspondence pertaining
to your return should bemailed to:
Alabama Department of Revenue
Income Tax Division
P.O. Box 327464
Montgomery,AL 36132-7464
Part I, Page 2
Line 1
Alimony Received
Enter the amounts you received as alimony or separate maintenance. Amounts you received in 2012 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 forline
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 losswill be recognized on a transfer of property between spouses or
former spouses. Please refer to Federal Law for more
Page 12Lines 2
Business Income or(Loss)
If you conducted a business or practiced a profession during the taxable year, youmust complete and attach a copy of Federal Schedule C or C-EZ to your
Alabama return.
Generally, youmay 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 deductONLY 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
andF, and certain itemsmay need adjusting forAlabama
purposes.The expenseswhichmay need adjusting are:
PercentageDepletionGas andOil. In the case
of oil and gaswells, the allowance for depletion shall be
12 percent of the gross income fromthe property during
the taxable year, excluding fromsuch gross income an
amount equal to any rents or royalties paid or incurred
by the taxpayerin 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.
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. ForAlabama purposes, the depletion allowance shall be computed using the cost depletionmethod.
Depreciation. Alabama law allows IRC Section
179 Expense for all taxable years beginning after December 31, 1989.Adjustmentsmay be necessary if assets were acquired and placed in service prior to tax
years beginning before January 1, 1990.
Targeted “JobsCredit.”Youmay 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 forAlabama 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
Federal Economic Stimulus Act of 2008
BonusDepreciation. Alabama lawhas no provision to
allowa deduction forthe bonus depreciation allowed by
the Federal Economic StimulusAct 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) frombusiness, as shown on
FederalScheduleC-EZ orCafter 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
areNOT held in connectionwith 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
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 fromyour IRA account
or annuity. Generally, you will receive a FORM1099-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.
YouMAYneed to complete theworksheet 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 theworksheet. If the “taxable amount”listed
on your Form1099RisNOT the same forAlabama 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
forAlabama purposes.
enter the total amount received on line 4a and the taxPage 13
A– IRA, SEP, Keogh, 401(k)(2), or 403(b) Distributions you received in 2012which included nondeductible contributions.
1 Enter the Total Value (includingwithdrawals) of your account at the end of the taxable year ………………………………..
2 Nondeductible Contributions (see instructions). Enter the total of all amounts you contributed that
did not qualify as an adjustment to income ………………………………………..
3 Enter the total of all amounts you have withdrawn and excluded fromincome in a previous year’s
Alabama return…………………………………………………………..
4 Balance of Nondeductible Contributions. Subtract line 3 fromline 2 ………………………………………………..
5 2012Withdrawals. Enter the amount you withdrew during the 2012 taxable year…………………………………………
6 Exclusion Ratio. Divide the amount on line 4 by the amount on line 1……………………………………………
7 Amount of Exclusion.Multiply the amount on line 5 by the percentage on line 6. Enter the result here, but DONOT entermore than
the amount on line 4 …………………………………………………………………………………
8 Amount Taxable. Subtract the amount on line 7 fromthe amount on line 5. If an IRA Distribution, enter result here and on Form40,
page 2, Part I, line 4b. If other than an IRA Distribution, enter the result on line 5b ………………………………………
B – Pensions, annuities, etc., you first began receiving after December 31, 1986 inwhich you had a cost basis.
9 Enter the total amount received this year …………………………………………
10 Amount Taxable. Use Federal SimplifiedGeneral Rule or FederalGeneral Rule (see page 14 of instructions) …………………
C – Pensions, annuities, etc., you first began receiving priorto January 1, 1987 inwhich you have notrecovered your cost.
11 Enter amount received this year ……………………………………………….
12 Enter the amount of your unrecovered cost………………………………………..
13 Amount Taxable. Subtract line 12 fromline 11 ……………………………………………………………..
14 TOTALAMOUNT TAXABLE. Add the amounts on lines 10 and 13. If an IRA Distribution, enter the total here and on Form40, page 2,
Part I, line 4b. If other than an IRAdistribution, enter on line 5b …………………………………………………..
Use Worksheet to report IRAdistributions, other distributions, and pension and annuity income which are not fully taxable. If a distribution is fully taxable, it is not necessary
to complete this worksheet
Not Fully Taxable Pensions,Annuities, and IRA Distributions (Include SEP, Keogh, 401(k)(2), and 403(b) Distributions)
WORKSHEET – PartiallyTaxable Pensions, Annuities, and IRA Distributions.
00able 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 IRSapplywhen completing yourAlabama return.
However, be sure to use Alabama Adjusted Gross Income when computing your limitations.
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 IRAinto a Roth IRA.
The taxable portion should not include any part of awithdrawal froma traditional IRAthat is a return of your basis.
CAUTION: If you have to complete theworksheet below
to calculate partially taxable distributions fromIRAwithdrawals any “taxable amount” fromthe worksheetmust
be added to the taxable amount fromany Roth conversion, orthe taxable amount of any otherIRArollovers or
distributions. The “grand total” of all taxable amounts
fromIRAdistributions,rollovers, conversions, etc. should
be included on Line 4b, of Form40, Page 2, Part 1.
Rollover Distributions
A“rollover” is a tax-free transfer of cash or other assets fromone retirement programto another. There are
two kinds ofrollovers to an individualretirement arrangement (IRA): (1) a rollover fromone IRAto another, and
(2) a rolloverfroma qualified employer’s plan to an IRA.
If you received a lump sumdistribution froman Employee Benefit Plan, it should be included in gross income in the year received. There is no provision in
Alabama lawforforward averaging of such distributions.
If the lump sumdistribution qualifies for the rollover
provision of the InternalRevenueCode, itmay also qualify for the rollover provision of theAlabama Income Tax
Code as provided in Alabama Income Tax Regulation
810-3-25-.05(4) reprinted below:
Regulation 810-3-25-.05(4)—[Distributions froma
trust that are not included in gross income of the individual for federal purposes due to the “rollover provisions” of InternalRevenueCodeSections 402, 403, 408,
and 409 are excluded fromAlabama gross income of
the individual. These are:
(a) 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,
(b) employee’s annuities which meet the requirements of InternalRevenueCodeSection 404(a)(2), and
the rolloverrequirements of InternalRevenueCodeSection 403,
(c) individual retirement accounts that qualify under
and meet the rollover provisions of Internal Revenue
Code Section 408, and
(d)retirement bonds that qualify underInternalRevenueCode Section 409 or InternalRevenueCode 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 Form40, Part
I, lines 4a and 4b.Astatement should also be attached
to your return giving complete information about the retirement fund rolled over, your cost in the plan, and the
type ofretirement account inwhich the distributed funds
were reinvested.
Lines 5a and 5b
Pensions andAnnuities
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, youwillreceive a Form1099-R
or a FormW-2Pshowing 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 priorAlabama 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.
WorksheetforPartially TaxablePensions,Annuities, and IRADistributions
Use the worksheet on the previous page to report
distributions fromprofit-sharing plans, retirement plans,
employee savings plans, and individual retirement
arrangements not fully taxable.Also, use thisworksheet
to report pension and annuity income not fully taxable. If
the income or distribution is fully taxable you do NOT
need to complete thisworksheet. In general, you should
receive a 1099-Rshowing the amount of yourretirement
plan distribution or income. If the taxable portion shown
on your 1099-R is the same for Alabama purposes as
for Federal purposes you doNOTneed to complete this
worksheet. Instead report the total and the taxable
amount on Form40, 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, youmust
complete thisworksheet to calculate the amount taxable
forAlabama purposes.
Amounts you received fromthe 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 SecurityActs.
Railroad retirement benefits received under the
Federal Railroad RetirementActs of 1935 and 1937.
Military Retirement Pay.
TVAPension SystemBenefits.
U.S. Foreign Service Retirement and Disability
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 systemby any eligible peace officer or designated
Any “defined benefit” retirement plan in accordancewith IRC414(j).(Contact yourretirement 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
2012which included nondeductible
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 2012. If you have more than one IRA (or other
type account) youmust enter the total value of all such
accounts even though you made withdrawals in 2012
fromonly one ormore of these accounts.
Caution: If you have more than one type of account
(IRA,SEP, etc.)which includes contributions fromwhich
you received nondeductible distributions in 2012, you
mustmake a separate computation for each type of account.
Line 2.Nondeductible contributions.Nondeductible
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 ismade froman IRAyou contributed
to prior to your residency inAlabama, your basis in that
IRAforAlabama purposeswill be the same as your basis
for federal purposes.
Amountsmay be considered nondeductible contributions forthe following reasons:
The FederalTaxReformAct of 1986 allowed you
tomake nondeductible contributions to your IRAeven if
you were unable to deduct all, part, or none of the contributions. Your nondeductible contribution is the difference between yourtotal allowable IRAcontributions (up
to themaximumamount) and the amount you deducted
on yourAlabama return that year.
Qualified contributions made by you to an individual retirement arrangement (IRA), simplified employee pension (SEP), orKeogh plan before January 1,
1982, are considered part of your nondeductible contributions sinceAlabama did not allowyou 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 sinceAlabama did not
allow you to defer tax on these contributions.
Line 3. Enter the total of all amounts you havewithdrawn from these accounts and excluded from income
on a previous year’sAlabama return.
Line 4. Subtract line 3 fromline 2 and enter the result on line 4. The difference in these amounts represents the balance of your nondeductible contributions.
Line 5. 2012 Withdrawals. Enter the total of all
amounts you withdrew fromyour IRA or other deferred
compensation accounts during the taxable year.
Line 6. ExclusionRatio.Divide the amount on line
4 by the amount on line 1. This ratio will be used to figure the amount of nondeductible contributions thatmay
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 entermore 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 acPage 14count, enter it on line 4b, Part I, Form40. If fromsome
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 inwhich 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 forwhich 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 samemanner as figured forfederal purposes. If the cost basis forAlabama purposes and Federal purposes is the same, the taxable part will be the
same. If the cost basis is different forAlabama, the taxable partwill be different. For details,referto 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 FederalSimplifiedGeneral
Rule, you will probably find it both simpler and more
beneficial than the FederalGeneral Rule in figuring the
taxable and nontaxable parts of your annuity.
If you meet the conditions to choose the Federal
SimplifiedGeneralRule, use theworksheet on belowto
figure your taxable pension for 2012. 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
2012 taxable pension.
C – Pensions, annuities, etc., you
began receiving priorto January 1,
1987 inwhich you have notrecovered
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 2012 and
enter your unrecovered cost on line 12.
For amounts you began receiving priorto 1987, you
can exclude fromthe taxable amount your unrecovered
cost to the plan.Your cost is the amount you contributed
plus the contributions your employermade onwhich 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 forAlabama purposes. However, if the pension
or annuitywas exempt underAlabama lawto 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 December 31, 1986, the beneficiarymust continue to use the FederalAnnuity 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 notrecovered the cost, the beneficiarywill continue
to recoverthe cost before any amounts become taxable.
Line 14. Add the amounts on lines 10 and 13.
If the amount on line 14 is received froman IRAaccount, enter it on line 4b, Part I, Form40. If fromsome
othertype account, the amount on line 14 should be entered on line 5b, Part I, Form 40. If you received distributions fromtwo ormore 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.
Formore information, see the instructions forScheduleE.ScheduleEshould be completed and attached to
Lines 7
Farm Income or(Loss)
If you operated a farmduring the year, youmust attach Federal Schedule F to your return.
Alabama lawdiffers fromfederal lawin the treatment
of certain items. See the instructions for line 2a, Part I,
for a description of the items thatmay 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, aftermaking the necessary adjustments, should be entered on line 7, Part I.
Line 8
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
Part II, Page 2
Adjustments To Income
Lines 1a and 1b
Individual RetirementArrangement
(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
fromthese accounts, the amount onwhich tax has been
deferred cannot be claimed as a cost basis in the fund.
Since theAlabama IncomeTax Lawpriorto 1982 did
not allowthese contributions to be deducted fromgross
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 Form1040 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 2012
Federalreturn.However,when figuring the limitation on
the amount deductible use the adjusted gross income
shown on line 10 of yourAlabama return without benefit of the IRAdeduction.
Line 2
Keogh Retirement Plan and SEP
Self-employed individualsmay deduct contributions
to aKeogh plan fromgross 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 fromthese
accounts, the amount on which tax has been deferred
cannot be claimed as a cost basis in the fund.
Since theAlabama IncomeTax Lawpriorto 1982 did
not allowthese contributions to be deducted fromgross
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
Line 3
Penalty on EarlyWithdrawal of
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 fromretirement plans are not deductible.
Page 15
Worksheet for Federal SimplifiedGeneral Rule
1. Total pension received this year.
Also enter this amount on Form40,
Page 2, Part I, line 5a………… __________
2. Your cost in the plan (contract),
including any death benefit
exclusion …………………. __________
3. Age at annuity starting date:
55 and under……………. 300
56-60 …………………. 260
61-65 …………………. 240
66-70 …………………. 170
71 and older…………….. 120 __________
4. Divide amount on line 2 by the
number on line 3, and round to two
decimal places……………… __________
5. Multiply line 4 by the number of
months for which this year’s
payments weremade………… __________
6. Taxable pension for year. Subtract
line 5 fromline 1 (do not enter less
than zero).Also, enter this amount
on Form40, Page 2, Part I, line 5b.
If your Form1099R shows a larger
taxable amount, use the amount on
this line instead of the amount from
the Form1099R ……………. __________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 notmade under a court order or awritten
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 reasonablemedical
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 anymedical and hospital expenses of
the adoptee and the adoptee’s biologicalmother which
are incident to the adoptee’s birth, and subsequentmedical care andwhich, 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 2012 return are limited
to those expenses paid or incurred on or after January
1, 2012, even though adoption proceedings may have
begun before this date.Aresident ofAlabama for only a
part of 2012 may deduct only those expenses paid or
incurred while a resident ofAlabama.Accurate records
of all expenses claimed as an adjustment to income
must bemaintained by the taxpayer and be available to
theAlabama 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 locationmust be within the State of
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 workplacemust be at least 50miles fromyour old
Only expenses incurred in themoving of household
goods and personal effects from the former residence
to the new residence and traveling expenses, including
lodgingwhile en route to the newlocation 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 ofmoving expenses. Enter the total and the newjob location as indicated on line 6.
Line 7
Health Insurance Deduction
You can deduct self-employed health insurance premiums to the same extent as allowed for federal
Line 8
Alabama PrepaidAffordable 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 paymentsmade to theAlabama PrepaidAffordable Tuition
Program(PACT) ortheAlabamaCollegeEducationSavings Program.
Line 9
Health Insurance Premium Deduction
Alabama resident taxpayers may deduct fromAlabama 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 employerthat has less than 25 employees
and earns no more than $50,000.00 of wages and reports nomore than $75,000.00 of adjusted gross income
on their Alabama individual income tax return or
$150,000.00 ifmarried filing joint.
Line 10
Expenses to Retrofit/Upgrade Home
to ResistWind 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 resistwind orflood damage.
The taxpayer must have a certification as prescribed
under Chapter 31D, Title 27, Code of Alabama 1975 or
theAlabama Residential and Energy Codes Board.
Line 11
Deposits to a Catastrophe
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
Before completing this section, see page 8 of
these instructions forthe definition of a dependent.
Please follow the line-by-line instructions on Form
40 to complete this section.
Part IV, Page 2
General Information
Line 1
Check the appropriate block for either full year or
part year residency status.
Full Year Resident. Check here if you were a legal
resident ofAlabama even if youwere employed outside
Part-Year Resident. Check here if you were not a
legalresident ofAlabama forthe entire year.(EXAMPLE:
During 2012 you moved into Alabama and became a
resident, or you moved out of Alabama and became a
resident of another state.)
Line 4
EntertheAdjustedGross Income and Taxable Income as reported on your 2012 Federal IncomeTaxReturn. This information is required under Section
40-18-56, Code ofAlabama 1975.
Line 5
If you received income fromsources taxable for Federal purposes but exempt forAlabama tax purposes, the
source(s) and amount(s) should be entered on line 5 unless they are explained elsewhere on the Alabama
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
orAlabama Form40 individual returns.
In orderto receive a direct depositreturn for a paper
return, your returnmust be prepared using tax preparation software that utilizes 2Dbar code technology orfrom
ourWeb site by using the Form40 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.
Line 1
The routing number must be nine digits. The first
two digitsmust 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.
Line 3
The account number can be up to 17 characters
(both numbers and letters), to include hyphens but omit
Page 16spaces and special symbols.Enterthe numberfromleft
to right and leave any unused boxes blank. Be sure not
to include the check number.
WARNING: Some financial institutions will not allow a
jointrefund to be deposited into an individual account. If
the direct deposit is rejected, a check will be sent instead.TheDepartment is notresponsible 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.
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
Youmay not use your own version of a tax formunless it meets the requirements of the Alabama Department of Revenue. All privately designed and printed
substitute tax formsmust be approved by theAlabama
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 fromApril 15, 2012
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 InternalRevenueService.Any of theAlabama Taxpayer ServiceCenters listed on page 2 of this
booklet 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
Failure To TimelyPay Tax. The penalty for not paying the tax when due is 1% of the unpaid amount for
eachmonth or fraction of amonth that the tax remains
unpaid. Themaximumpenalty is 25%.
Underpayment Penalty. If the amount you owe for
2012 is $500.00 or more you may owe the penalty for
2012 if the total of yourwithholding and timely estimated
tax payments did not equal at least the smaller of:
1. 90% of your 2012 tax (66-2/3% for farmers), or
2. 100% of your 2011 tax. (Your 2011 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 Form40 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 byAlabama 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
Criminal Liability. Section 40-29-112, Code ofAlabama 1975, as amended, provides for a more severe
penalty for not filing tax returns.Any person required to
file a return underthis titlewhowillfully fails tomake such
return shall be guilty of a misdemeanor and upon conviction thereof, shall be fined notmore than $25,000 or
imprisoned not more than 1 year, or both. Section 40-
29-110 provides that any personwhowillfully 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 byAlabama law.
Address Change
If youmove after filing your return and expect a refund, you should notify theDepartment ofRevenue and
send a change of address notice to: Alabama Department of Revenue, Individual and Corporate Tax
Division, P. O. Box 327410,Montgomery, 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 theAlabama Department
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 fromthe date the returnwas filed. If income that should have been reported
was notreported 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
yourrecords.You should keep some records longerthan
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 yourreturns and your
other recordsmay 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 Form4506-A,Request forCopy of Tax
Form or Income Tax Account Information. The charge
for a copy of a return is $5.There is no charge fortax account information.
Amended Return
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 shouldmail in a completed Form40X,
Amended Alabama Individual Income Tax Return, to
change those items. Beginning with tax year 2008 you
should file a completedAlabama Individual Income Tax
Returnwith the “Amended” box checked.Adetailed 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. Thiswould
include changesmade as a result of an examination of
your return by the Alabama Department of Revenue.
Contact the Internal Revenue Service for more
Death of Taxpayer
If the taxpayer died before filing a return for 2012,
the taxpayer’s spouse or personal representative must
file a return forthe personwho died if the deceasedwas
required to file a return.Apersonalrepresentative can be
an executor, administrator, or anyonewho 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 returnmust be filed to receive a refund.
If your spouse died in 2012, you can file a jointreturn
even if you did not remarry in 2012. You can also file a
joint return if your spouse died in 2013 before filing a
2012 return. A joint return should show your spouse’s
2012 income before death and your income for all of
2012.Alsowrite “Filing as surviving spouse” in the area
where you sign the return. If someone else is the personal representative, he or shemust also sign.
If you are claiming a refund as a surviving spouse
filing a joint returnwith the deceased and you followthe
above instructions, no other formis needed to have the
refund issued to you.Please note:AnAlabama refund
of a deceased taxpayer cannot be issued to a third
Payment of Estimated Tax
Every individual who reasonably expects to owe at
least $500.00 in tax in 2013 is required to file and pay estimated tax.
Note: If the TOTAL ESTIMATED TAX for 2013 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 notinclude payment of your estimated taxwith the payment fortax due
Page 17on your individual return because the quarterly voucher
and remittance MUST be mailed separately. Additional
instructions for filing your estimates are on the back of
No refundwill bemade for any estimated taxes paid
exceptwhen 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.
Automatic Extension
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 untilOctober 15,
2013. If you anticipate that you will owe additional tax
on your return you should submit your payment with a
payment voucher (Form40V) byApril 15, 2013.
Except in caseswhere taxpayers are abroad, no extension will be granted formore than 6months.
An extension means only that you will not be assessed a penalty forfiling yourreturn afterthe due date.
Interest on the additional tax due from the due date of
the return and any penaltieswill 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 refundmay 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 theAlabamaMedicaidAgency.
Overpayment of unemployment compensation.
Any and all court fees/fines owed to theAdministrativeOffice of Courts.
If the Alabama Department of Human Resources,
Alabama Department of Industrial Relations, Alabama
MedicaidAgency, or theAdministrativeOffice of Courts
notifies the Alabama Department of Revenue that you
have a delinquent account in excess of $25, part or all
of your refundmay be applied to offset that debt. If you
aremarried and filing a joint return, the joint refundmay
be applied to offset any of the above debts.
IMPORTANT: If you have been assessed taxes froma
prior year, your current yearrefundwill be applied to that
debt even if the liability resulted froma jointly filed return.
Federal Refund Offset
Your 2012 Federal or State refund will be taken to
satisfy any outstanding liabilities owed to the State of
Alabama or to the Internal Revenue Service.
Instructions for
5 Schedules to
Form 40
Instructions For
Schedule A(Form 40)
Itemized Deductions
Changes You Should Note
The itemized deductions you may claim on your
2012 Alabama return are similar to the deductions allowed for Federal purposes; however, certain itemsmay
be treated differently. Please see the line by line instructions which follow for an explanation of these
Purpose of Schedule
Some taxpayers should itemize their deductions because theywill savemoney.See Itemized orStandard
Deduction on page 8.
ScheduleAmust be completed in detail if you elect
to itemize your deductions instead of claiming the standard deduction.
If you itemize, you can deduct part of your medical
and dental expenses, part of your unreimbursed employee business expenses, amounts you paid for certain taxes, interest, contributions, and other
miscellaneous expenses. You may also deduct certain
casualty and theft losses.
Married, Filing Separate Returns. If you are married and filing separate Alabama returns, both spouses
may itemize their deductions or bothmay claimthe standard deduction. One spouse cannot itemize and the
other claimthe standarddeduction.Each spousemay
claimonly the itemized deductions he/she actually paid.
Part-yearResidents. Individuals becoming or ceasing to be residents during the year are entitled to claim
ONLY the itemized deductions that were actually paid
while a resident ofAlabama.TheDepartmentwill permit you to prorate a deduction (such as interest ortaxes)
based on the number of months you were a resident if
the deduction was paid during the entire year and the
amount actually paid while a resident cannot be
Lines 1 through 4
Medical and Dental Expenses
Before you can figure your totalmedical and dental
expenses, you must complete your Form 40, page 1,
through line 10.
Medical and dental expenses are allowed as itemized deductions to the same extent as allowed forfederal
purposes with the following exceptions:
You may deduct only that part of your medical
and dental expenses that ismore than 4%of the amount
on Form40, page 1, line 10.
Qualified long term care premiums are not included in medical and dental expenses. They are deductible in full on Line 26.
Do not include in medical and dental expenses insurance premiums paid by an employer-sponsored
health insurance plan (cafeteria plan).
Line 1
Enter the total of yourmedical and dental expenses
after reducing these expenses by any payments received from insurance or other sources. Include
amounts you paid for doctors, dentists, nurses, hospitals, prescriptionmedicine and drugs, orinsulin.Also include the total amount you paid forinsurance premiums
for medical and dental care, amounts paid for transportation and lodging, and other expenses such as hearing aids, dentures, eyeglasses, and contact lenses.
If your insurance company paid your doctor or dentist directly for part of your medical expenses and you
paid only the amount that remained, include in your
medical expensesONLY the amount you paid.
If you received a reimbursement in 2012 of prior year
medical or dental expenses, do not reduce your 2012
expenses by this amount. You must include the reimbursement in income on Form 40, Part 1, line 7, if you
deducted the medical expenses in the earlier year and
the deduction reduced your tax. Federal Pub. 502 tells
you how to figure the amount to include in income.
When figuring the deduction, youmay includemedical and dental bills you paid for:
Your spouse.
All dependents claimed on your return.
Your child whom you do not claim as a dependent because of the federal rules explained for Children
of Divorced or Separated Parents.
Examples ofMedical and Dental
Payments You CAN Deduct
To the extent you were not reimbursed, you can
deduct what you paid for:
Medicare Part B insurance.
Prescriptionmedicines and drugs, or insulin.
Premiums paid to private insurers for additional
Medicare coverage.
Medical doctors, dentists, eye doctors, chiropractors, osteopaths, podiatrists, psychiatrists, psychologists, physical therapists, acupuncturists, and
psychoanalysts (medical care only).
Medical examinations,X-ray and laboratory services, insulin treatment, and whirlpool baths the doctor
Nursing help. If you pay someone to do both
nursing and housework, you can deduct only the cost of
the nursing help.
Hospital care (includingmeals and lodging), clinic
costs, and lab fees.
Medical treatment at a center for drug addicts or
Cost of aweight-loss programfor the purpose of
treating diagnosed obesity or another recognized disease. Costmust be out-of-pocket and uncompensated.
Medical aids such as hearing aid batteries,
braces, crutches,wheelchairs, guide dogs, and the cost
ofmaintaining them.
Lodging expenses (but not meals) paid while
away fromhome to receivemedical care in a hospital or
amedical care facility that is related to a hospital.Do not
includemore than $50 a night for each eligible person.
Ambulance service and other trav