120S — Arizona S Corporation Income Tax Return (2025 instructions)

preamble

Arizona Form 2025 Arizona S Corporation Income Tax Return 120S

Phoenix (602) 255-3381

If you need tax forms, instructions, and other tax information, go to the department's website at www.azdor.gov.

Income Tax Procedures and Rulings These instructions may refer to the department's income tax procedures and rulings for more information. To view or print these, go to our website and select Reports & Legal Research. On the next page, click on Legal Research. Select a Document Type and a Category from the drop down menus. If you know the document ID number you may enter it in the Search field and then press enter.

Publications To view or print the department's publications, go to our website, scroll down, click on Reports & Legal Research, and click on Publications in the right hand column.

General Instructions

Who Must Submit Arizona Form 120S

Corporations taxed as S Corporations under Subchapter S of the Internal Revenue Code (IRC) must file Arizona Form 120S. Qualified subchapter S subsidiaries are not treated as entities separate from the parent corporation and would be included on a single Arizona Form 120S filed by the parent S Corporation.

Due Date for Arizona Form 120S

All S Corporation returns are due on or before the 15th day of the third month following the close of the S Corporation's taxable year. For example, an S Corporation whose taxable year ends on December 31st must file its S Corporation return by March 15th of the following year, or request a filing extension. If it does not file its return by the due date, or request an extension, its return will be considered to be filed late.

Disaster Relief for Out-of-State Businesses

If an out -of-state business is in Arizona on a temporary basis solely to perform disaster recovery from a declared disaster during a disaster period, it may not be required to file, remit, withhold or pay state or local income tax. See the department's publication, Pub. 720, Disaster Recovery Tax Relief to determine if the taxpayer qualifies for this relief.

Entity Classification under the Federal "Check -the- Box Rules"

The federal tax classification of an entity under the federal "check-the-box rules" determines the entity's classification for Arizona tax purposes. Refer to the department's ruling, CTR 97-1, Federal "Check-The-Box Rules" on Elective Tax Classification.

Limited Liability Companies

A limited liability company (LLC) that makes a valid federal election to be taxed as an S Corporation must file Arizona Form 120S.

A single-member LLC that is disregarded as an entity for federal income tax purposes is treated as a branch or division of its owner, and is included in the tax return of its owner. Refer to the department's ruling CTR 97-2, Limited Liability Companies, for further information. Marijuana Establishments, Marijuana Testing Facilities, Dual Use Licensees and Nonprofit Medical Marijuana Dispensaries

• An S Corporation licensed by the Arizona Department of Health Services (ADHS) as a Marijuana Establishment (Adult Use) or Marijuana Testing Facility (Adult Use), must file an Arizona S Corporation Income Tax Return - Arizona Form 120S to report the income and expenses of its operations for the taxable year. • An S Corporation licensed by ADHS as a Dual Use Licensee (Dual Use) that elected to operate on a for-profit basis, must file an Arizona Form 120S to report the income and expenses of ALL its operations for the taxable year. • An S Corporation licensed by ADHS as a Dual Licensee that did not elect to operate on a for-profit basis, must file Arizona Form 99M to report the income and expenses from the Nonprofit Medical Marijuana Dispensary (NMMD) portion of its operations, AND file Arizona Form 120S. The Dual Licensee that did not elect to operate on a for- profit basis must also complete Arizona Form 120S Schedules K-1 and K- 1(NR) and provide copies of each shareholder's respective K -1 or K- 1(NR) to the shareholder as the shareholders are not exempt from Arizona income tax • An S Corporation registered by ADHS as an NMMD only, must file Arizona Form 99M and Arizona Form 120S to report the income and expenses from its operation as an NMMD. The NMMD must also complete Arizona Form 120S Schedules K-1 and K-1(NR) and provide copies of each shareholder's respective K -1 or K -1(NR) to the shareholder as the shareholders are not exempt from Arizona income tax.

The Pass-Through Entity Election (PTE)

For taxable years beginning from and after December 31, 2021, the shareholders of a business that is taxed at the federal level as an S Corporation may consent to have its flow-through (or passthrough) income taxed at the entity level in Arizona. The Arizona PTE income tax is assessed at a rate of 2.5 % of the income attributable to the S Corporation's resident shareholders and the income derived from sources within Arizona attributable to the nonresident shareholders.

S Corporations Making the Pass-Through Entity Election

The PTE election must be made on the S Corporation Arizona income tax return, Arizona Form 120S.

An S Corporation 1,2 that intends to make this election must notify all shareholders who are individuals or estates and

1 An S Corporation share that is owned by a grantor trust that is disregarded for federal income tax purposes may make the PTE election. 22 An S Corporation share that is owned by a Single Member LLC that is disregarded to an individual for federal income tax purposes may make the PTE election.

trusts (eligible shareholders) of the intent to make this election. Each eligible shareholder has the right to opt out of this election. The notice must allow each eligible shareholder at least 60 days after receiving the notice to exercise the right to opt out of the election. If the eligible shareholder does not respond, that shareholder will be included in the election.

Shareholders that are not individuals or estates and trusts (ineligible shareholders) may not participate in this election. Shareholders who are individuals or estates and trusts who opt out of this election also may not participate in the PTE election.

If the S Corporation making this election does not pay the tax owed to the department, the department may collect the tax owed by the S Corporation from its eligible shareholders based on the proportionate share of income attributable to each eligible shareholder for Arizona tax purposes.

S Corporations whose taxable income for the previous year exceeds $150,000 must make payments of estimated tax. Estimated tax payments are due April 15 th, June 15 th, and September 15th of the current taxable year and January 15th of the year following the close of the taxable year. (For taxable years that do not begin January 1 st, the due dates for estimated tax payments are the 15th day of the 4 th, 6th, and 9th months of the current taxable year and the 15th day of the 1st month following the close of the taxable year.)

NOTE: For additional information on the PTE election, refer to Publication 713, The Arizona Pass-Through Entity Election, available here: https://azdor.gov/sites/default/files/2023- 03/PUBLICATION_713.pdf. ( Pu b lication 713 has been updated as of September 2025.)

S Corporations Not Making the PTE Election After Making PTE Estimated Payments During the Year

S Corporations that make PTE estimated payments during the 2025 taxable year and then elect NOT to make the PTE election on their 2025 Arizona S Corporation Tax Return [Arizona Form 120S] MUST complete a $0 return for the 2025 taxable year. The S Corporation must complete Arizona Form 120S to report its earnings and its distributions to its shareholders [on Form 120S, Schedule K -1 for its resident shareholders, or Form 120S, Schedule K -1(NR) for its nonresident shareholders] to the department. The steps indicated below MUST be taken by the S Corporation to ensure it receives its refund of PTE estimated taxes paid during taxable year 2025.

NOTE: If the S Corporation made any 2025 estimated tax payments for the PTE election and is not making the PTE election on its 2025 Arizona S Corporation Income Tax Return, it must file a S Corporation return for taxable year 2025 indicating it is NOT making the PTE election. The payment(s) of estimated tax made during the year will be refunded to the S Corporation. This refund cannot be applied to the S Corporation's 2026 taxable year PTE estimated tax liability. It cannot be applied to an individual shareholder's tax liability.

How to File a "0" S Corporation Return to Claim a Refund of the PTE Estimated Tax payments3 if the S Corporation is NOT subject to income tax in Arizona:

• Line A, check the "No" box. • Complete lines B through H and 1 through 17 as directed. • Skip to Part 2 on page 2. • Line 37, enter "0". • Lines 46 through 48 and lines 50 through 52, enter "0". • Return to Part 1, line 18 and enter "0". • Line 19, enter "0". • Line 21, enter the total of all extension payments made. • Line 22, enter the total of all estimated payments made during the year. • Line 23, enter "0". • Line 24, a dd lines 20 through 23 and enter the total . Also, enter this amount on lines 26, 27, 29, 34, and 36. • Line 36, this amount is refundable to the S Corporation.

How to File a "0" S Corporation Return to Claim a Refund of the PTE Estimated Tax payments 4 i f the S Corporation is subject to tax in Arizona5:

• Line A, check the "No" box. • Complete lines B through H and 1 through 17 as directed. • Skip to Part 2 on page 2. • Line 37, enter "0". • Lines 46 through 48 and lines 50 through 52, enter "0". • Return to Part 1, line 18 and enter "0". • Line 19, add lines 17 and 18. Enter the total. • Line 20, enter the amount of refundable credits being claimed (if any) by the S Corporation (on its Arizona corporate tax liability). If refundable credits are claimed, check the box(es) corresponding to the refundable credit(s) claimed. • Line 21, enter the total amount of extension payments made. • Line 22, enter the total of all estimated payments made during the year. • Line 23, enter "0". • Line 24, add lines 20 through 23. Enter the total. • Line 25, enter "0". • Line 26, subtract line 25 from line 24. Enter the difference. Also, enter this amount on line 27

33 PTE Estimated Tax payments include amounts paid as PTE estimated taxes and any extension payments made with the intent that the extension payment was to be applied to the S Corporation's PTE Tax liability. 44 PTE Estimated Tax payments include amounts paid as PTE estimated taxes and any extension payments made with the intent that the extension payment was to be applied to the S Corporation's PTE Tax liability. 5 The S Corporation is subject to federal income taxes or the S Corporation is subject to the recapture of an Arizona income tax credit previously claimed.

• Line 28, if line 19 is larger than line 27, subtract line 27 from line 19. Enter the difference. This is the balance of Arizona corporate tax owed by the S Corporation. • Line 29, if line 27 is larger than line 19, subtract line 19 from line 27. Enter the difference. This is the amount of the S Corporation's overpayment of Arizona corporate tax. • Line 30, if the S Corporation is subject to penalties and interest, enter that amount here. • Line 31, enter "0". • Line 32, enter "0". • Line 33, if the S Corporation has a balance due on line 28, add lines 28 through 30. Enter the total here. • Line 34, if the S Corporation has an overpayment on line 29, subtract the total of lines 30 through 32 from line 29. If the difference is positive, enter that amount on line 34. 6 This is the total overpayment. • Line 35, enter "0". • Line 36, subtract line 35 from line 34. Enter the difference. This amount of tax that is refundable to the S Corporation.

Records

Every S Corporation should maintain books and records substantiating information reported on the return and keep these documents for inspection. Refer to the department's General Tax Ruling ( GTR) 96-1, Electronic Data Processing for more information about record retention requirements.

IRC § 7519 Required Payments

Taxpayers cannot deduct the federal required payments on their Arizona tax returns as an ordinary and necessary business expense or otherwise.

Rounding Dollar Amounts

Taxpayers must round amounts to the nearest whole dollar. If 50 cents or more, round up to the next dollar. If less than 50 cents, round down.

Examples:

Company A (A) reports federal taxable income of $15,000. A has no Arizona additions to, or subtractions from, federal taxable income. Its apportionment ratio is .326954. A multiplies the federal taxable income by the apportionment ratio. The result is $4,904.31. Company A rounds the result to $4,904.00.

Company W (W) reports a federal taxable loss of ($27,000). W has no Arizona additions to, or subtractions from, federal taxable income. Its apportionment ratio is .005946. W multiplies its federal loss of ($27,000) by the apportionment ratio. The result is an Arizona loss of ($160.54). Company W rounds the result to ($161.00).

Company Z (Z) reports a federal taxable loss of ($500). Z has no Arizona additions to, or subtractions from, federal taxable income. Its apportionment ratio is .075000. Z multiplies its federal loss of ($500) by the apportionment ratio. The result is an Arizona loss of ($37.50). Company Z rounds the result to ($38.00).

77 The extended due for an S Corporation return is six months from the original due date of the return.

Timely Filing of Returns

• The department determines the timeliness of an electronically filed tax return by the date of the electronic postmark. If the taxpayer and the electronic return preparer or the electronic return transmitter are in different time zones, it is the taxpayer's time zone, as determined by the taxpayer's address, that controls the timeliness of the electronically filed return. When a return has been electronically received on the host system of more than one electronic return preparer or electronic return transmitter during its ultimate transmission to the department, the return shall be deemed filed and received by the department on the date of the earliest electronic postmark. •• The department determines the timeliness of a tax return by the postmark or other official mark of the United States mail stamped on the envelope in which the return is mailed. See the department's ruling, GTR 16-1, Timely Filing of Income or Withholding Tax Returns Through the United States Mail. • The Department will accept proof of mailing from a private delivery service included in the Internal Revenue Service (IRS) list of designated private delivery services. Contact the private delivery service for information regarding how to obtain written proof of mailing. •• If the due date for the return falls on a Saturday, Sunday, or a legal holiday, the return is considered timely filed if it is postmarked the next business day. See the department's ruling, GTR 16-2, Timely Filing of Income or Withholding Tax Return - Holidays and Weekends..

IMPORTANT: All S Corporation returns are due on or before the 15th day of the third month following the close of the taxable year.

Extension of Time to File a Return • A request for an extension of time to file an Arizona corporate income tax return must be submitted by the original due date of the return. • The extension request can be made by filing an Arizona extension request, Arizona Form 120/165EXT, or by filing a federal extension. • You may file Form 120/165EXT electronically or by mail. If mailing, submit Form 120/165EXT to: Arizona Department of Revenue P O Box 29079 Phoenix, AZ 85035-9079 • If the original return is filed under extension, do not include a copy of the extension with your return. However, make sure to check the extension box, 82F, on page 1 of your return. • If the S Corporation has a tax liability of less than $500 for the year, Arizona Form 120/165EXT may be used to transmit extension payments by check or money order, regardless of how you request an Arizona extension (valid federal extension or Arizona Form 120/165EXT). • S Corporations with a tax liability of $500 or more for the 2025 taxable year must pay their tax liability by Electronic Funds Transfer. (See How to Make EFT Payments , beginning on page 5 for details.)

• If you made extension payments electronically, or via AZTaxes.Gov, you are not required to file Arizona Form 120/165EXT unless you are requesting an Arizona filing extension. • The Arizona extension and the federal extension provide an extension of time to file, but they do not provide an extension of time to pay tax. o You must pay 90% of your tax liability (including the $50 minimum tax) by the original due date of your return. o The department imposes the extension underpayment penalty on any late or underpaid extension requests. • See the department's ruling, CTR 01 -3, Extensions, for additional information. • Submit the extension request to the department electronically or mail Form 120/165EXT to: Arizona Department of Revenue PO Box 29079 Phoenix, AZ 85038-9079

S Corporations filing composite returns: Use Arizona Form 204 to request an extension of time to file a composite return on Arizona Form 140NR for qualifying nonresident individual shareholders.

Filing Original Returns • S Corporation returns are due by the 15 th day of the 3rd month following the close of the taxable year. • An S Corporation filing a short-period return must file the return by the 15th day of the 3rd month after the short-period ends. • If the S Corporation has a valid federal or Arizona filing extension, the return is due by the extended due date7. • If the return is filed under extension, check box 82F on page 1 of the return. • If the original due date or extended due date for the return falls on a Saturday, Sunday, or a legal holiday, the return is considered timely filed if it is postmarked the next business day. See the department's ruling, GTR 16-2, Timely Filing of Income or Withholding Tax Return - Holidays and Weekends. • The return must be signed by one or more of the officers of the S Corporation (President, Treasurer, or any other principal officer). • Do not submit a blank Arizona return with a copy of the federal return. S Corporations must: o Furnish complete data, o Answer all questions on the return, o Complete all applicable schedules, and, o Include all appropriate supplementary schedules. • You must electronically submit Arizona Form 120S unless you have one of the following: o A federal waiver from electronically filing your federal return. o You meet one of the federal exemptions from electronically filing your federal return. o You received an Arizona filing waiver.

77 The extended due for an S Corporation return is six months from the original due date of the return. o You meet one of the Arizona exemptions from electronically filing your Arizona return. o You have been directed by the IRS or the department to paper file your return. • If you have been granted a waiver from electronically filing Arizona Form 120S, or you are not required to e-file your return, mail the return to: Arizona Department of Revenue P.O. Box 29079 Phoenix, AZ 85038-9079 • The department requests that S Corporations include a copy of their "as-filed" federal Form 1120-S and all its schedules and attachments with their Arizona return.

Taxable Year Covered by Return

The S Corporation must have the same taxable year for Arizona purposes as it has for federal purposes.

File the 2025 Arizona Form 120S for calendar year 2025 and fiscal years that begin in 2025 and end in 2026. Indicate whether the taxable year is a calendar year or a fiscal year. If the return is for a fiscal year, indicate the beginning and ending dates for the year in the space(s) provided at the top of page 1. If this is a short-period return, indicate the beginning and ending dates for the year in the space(s) provided at the top of page 1. Check the box is this fiscal year return is based on a 52/53 week taxable year.

The 2025 Arizona Form 120S can also be used if the S Corporation has a tax year of less than 12 months that begins and ends in 2026 and the 2026 Arizona Form 120S is not available at the time the S Corporation is required to file its return. The S Corporation must show its 2026 year on the 2025 Arizona Form 120S and take into account any tax law changes that are effective for tax years beginning after December 31, 2025. If submitting the 2025 Arizona Form 120S for a 2026 short-period return, submit a paper filed return. Do not submit this short - period return electronically.

Filing Amended Returns

Electronic filing of amended S Corporation returns for the 2025 taxable year is available. • S Corporations that filed their amended federal return electronically, must submit their Arizona amended return electronically 8. • S Corporations that filed their original return electronically may submit their Arizona amended return electronically. • Any S Corporation that files an amended return with the IRS must file an Arizona amended return on Arizona Form 120S, for the tax year amended (i.e. 2025 Arizona Form 120S for tax year 2025) within 90 days of final determination of the federal amended return by the IRS. When filing an amended return, check the box labeled "Amended" in the upper right corner of the return. • S Corporations must report to the department changes or corrections to their taxable income by the IRS or as a

8 If the software vendor does not support the electronic filing of amended returns, the S Corporation may submit its amended return as a paper return.

result of renegotiation of a contract or subcontract with the United States. • Within 90 days after the final determination of the change or correction, the S Corporation must: o File a copy of the final determination with the department, concede the accuracy of the determination or state any errors, and request that the department recompute the tax owed Arizona, or o File an amended return as required by the department. • If your amended Arizona return is due to federal changes, either an amended federal return or a Revenue Agent Report (RAR), please include a copy of your amended federal return or RAR with your amended Arizona return. • The S Corporation must provide sufficient information for the department to recompute the S Corporation's Arizona taxable income based on the RAR changes. • The department may require the S Corporation to file an amended return if the department does not have this information.

• If your original or amended federal return was submitted electronically, you may submit the amended Arizona Form 120S to the department electronically. If your original federal return was filed as a paper return, or if electronic filing is unavailable, mail the amended Arizona Form 120S to: Arizona Department of Revenue PO Box 29079 Phoenix, AZ 85038-9079 • If the S Corporation was required to make its tax payments for the 2025 taxable year by electronic funds transfer (EFT), it must pay any additional tax due from an amended return by EFT.

NOTE: File amended returns for prior taxable years on the respective Arizona Form 120S for those taxable years. Use the 2025 Arizona Form 120S to amend only the taxable year 2025.

Do NOT file an amended return until your original return has been processed.

Electronic Filing of S Corporation Income Tax Returns

Electronic filing of Arizona S Corporation income tax returns is required. Please see the department's website at : https://azdor.gov/e-services/approved-vendors for a list of approved software vendors.

Which S Corporations Are Not Required to Electronically File (e-file) Their Arizona Income Tax Returns?

• S Corporations that cannot e-file their federal return cannot e-file their Arizona return. • Any S Corporation that was granted a federal waiver from filing its federal return is not required to e-file its Arizona return. • Any S Corporation having a federal exemption from electronically filing its federal return is not required to e-file its Arizona return. • Any S Corporation having an Arizona electronic filing waiver or an Arizona exemption is not required to e-file its Arizona return. • An S Corporation submitting the 2025 Arizona Form 120S for a 2026 short period return, submit a paper filed return. Do NOT submit this short period return electronically. • Any S Corporation that has been directed to file a paper return by the IRS or by the department • Due to system constraints, the department's computer system can handle an electronically filed return up to 246MB is size. The department requests that returns in excess of 246MB be filed as a paper return.

Requesting an Electronic Filing Waiver

Any S Corporation taxpayer who is required to file its income tax return electronically may apply to the director for an annual waiver from the electronic filing requirement. The waiver may be granted if any of the following apply: • The taxpayer has no computer. • The taxpayer has no internet access. • Any other circumstance considered to be worthy by the director.

Waivers are granted on an annual basis and expire at the end of the requested tax year. Waivers must be renewed each calendar year. If a waiver is not renewed, you will be subject to statutory electronic filing and payment requirements at the expiration of your waiver.

To request a waiver, submit Arizona F orm 292, Electronic Filing and Payment Waiver Application, to the department. Arizona Form 292 is available at: https://azdor.gov/forms/otherforms/electronic-filing-and-payment-waiver-application.

A waiver is not required if the S Corporation income tax return cannot be electronically filed for reasons beyond the taxpayer's control, including situations in which the taxpayer was instructed by either the Internal Revenue Service or the Arizona Department of Revenue to file by paper.

Please contact the department at azefile@azdor.gov if you need assistance in electronically submitting your Arizona S Corporation income tax return. If your return has been rejected, please include the Arizona submission ID and the form type (i.e. 120S) in your correspondence.

Submitting Arizona Form 120S Schedule(s) K -1 and Arizona Form 120S Schedule(s) K-1(NR)

Schedules K-1 and K-1(NR) [Notice] are an integral part of the S Corporation return. File one copy of each shareholder's Notice with the S Corporation return. Provide each shareholder with a copy of their completed Notice. Retain a copy of each completed Notice for the S Corporation's records.

For calendar year filers, check the box, "calendar year 2025 ." For fiscal year filers, check the box, "fiscal year" and enter the beginning and ending dates for the fiscal year. If this is a shortperiod return, indicate the beginning and ending dates for the short period.

NOTE: See pages 18 and 20 for instructions on completing Arizona Forms 120S, Schedule(s) K-1 and K-1(NR).

S Corporations filing their S Corporation return electronically must submit Schedule(s) K-1 and Schedule(s) K-1(NR) to the department electronically.

S Corporations filing a paper return must submit Schedule(s) K-1 and K-1(NR) to the department by paper.

Payment of Tax, Penalties, and Interest

The entire amount of tax, penalties, and interest is due by the original due date of the return.

Payment by Electronic Funds Transfer

S Corporations with a tax liability of $500 or more for the 2025 taxable year must pay their tax liability by Electronic Funds Transfer (EFT).

NOTE: If an S Corporation was required to pay its 2025 tax liability by EFT, it must also pay any additional tax due from an amended return by EFT.

Requesting a Waiver From the EFT Requirement

An S Corporation may apply to the director for an annual waiver from the electronic payment requirement. The application must be received by December 31 of each year. The director may grant the waiver if any of the following applies: • The S Corporation has no computer. • The S Corporation has no internet access. • Any other circumstance considered to be worthy by the director exists, including: o The S Corporation has a sustained record of timely payments, and, o No delinquent tax account with the department.

To request a waiver, submit Arizona Form 292, Electronic Filing and Payment Waiver Application, to the department. Arizona Form 292 is available at: https://azdor.gov/forms/other- forms/electronic -filing-andpayment -waiver-application .

NOTE: A corporation who is required to pay by EFT but who fails to do so is subject to a penalty of 5% of the amount of the payment not made by EFT. See A.R.S. § 42-1125(O).

For additional information on electronic funds transfer, refer to A.R.S. § 42-1129 and the related Arizona Administrative Code rules (A.A.C. R15 -10-301 through R15- 10-307) for detailed information.

How to Make EFT Payments

S Corporations making an EFT payment from a checking or savings account or by credit card are no longer required to register with the department prior to making EFT payments. Visit AZTaxes.gov, click "Make a Corporation/S Corporation/Partnership Payment" and follow the prompts.

• Electronic payment from checking or savings account/ e-check/ACH Debit.

Payments can be made electronically from a checking or savings account. Go to: www.AZTaxes.gov, click "Make a Corporation/S Corporation/Partnership Payment", follow the prompts, and choose the e -check option. Follow the prompts to make your payment.

There is no fee to use this method. This payment method will debit the amount from the specified checking or savings account on the date specified. When an electronic payment is made from a checking or savings account, a confirmation number will be generated. Please keep this confirmation number as proof of payment. • Online credit card payment.

Payments can be made by American Express, Discover, MasterCard, or Visa credit cards. Go to www.AZTaxes.gov , click "Make a Corporation/S Corporation/Partnership Payment", follow the prompts, and choose the credit card option. This will take you to the website of the credit card payment service provider. Follow the prompts to make your payment.

The service provider will charge a fee based on the amount of the tax payment. The service provider will disclose the amount of the fee during the transaction and you will be given the option to continue or cancel. If you accept the fee and complete the credit card transaction, a confirmation number will be generated. Please keep this confirmation number as proof of payment.

• S Corporations may also make EFT payment by ACH Credit. S Corporations wishing to pay by ACH credit must register with the department before their ACH payment will be accepted.

To register to make ACH Credit payments, complete Arizona Form number 10366, Electronic Funds Transfer (EFT) Disclosure Agreement for ACH Credit filers, available here: https://azdor.gov/forms/other- forms/electronic -fundstransfer -eft-disclosure -agreement -ach-credit-filers. Complete the form as instructed. Submit the completed form at least ten business days before the first anticipated transaction as it may take that long to process the application.

Fax the completed form to the department at (602) 771-9913. You may also email the completed form to the department at electronicfundstransfer@azdor.gov. If you have not received your approval within one week, you may direct follow-up inquiries to: electronicfundstransfer@azdor.gov. Once the application is processed, you will receive additional information to present to your bank to make the ACH Credit payment.

Your payment will be electronically transferred into the department's account, normally the next business day. Consult with your bank for the timeframe required to make timely payments. You may be charged a service fee.

NOTE: S Corporations using a foreign bank account to make EFT payments cannot make EFT payments by ACH Debit. The department does not accept ACH Debit payments from a foreign bank account. If the S Corporation wishes to make payment from a foreign bank account by EFT, the payment MUST be made by ACH Credit. See the instructions for ACH Credit above to register and make ACH Credit payments.

Estimated Tax Payments for 2026

S Corporations subject to tax at the federal level

S Corporations subject to tax at the federal level that expect an Arizona income tax liability for the taxable year of $1,000 or more must make Arizona estimated income tax payments. Compute the required minimum payment using the corporate tax rate, 4.9% of Arizona taxable income. All S Corporations required to make Arizona estimated payments must make those

payments by the 15th day of the 4th, 6th, 9th, and 12th months of their taxable year.

The Arizona required annual payment of estimated tax for an S Corporation is the smaller of: A. Ninety percent of the S Corporation's Arizona tax liability for the current taxable year; or B. An amount equal to the sum of: o Ninety percent of the portion of the current taxable year's Arizona tax liability attributable to built-in gains income or certain capital gains income, plus o One hundred percent of the portion of the prior taxable year's Arizona tax liability that is attributable to excess net passive income.

NOTE: For the S Corporation to base its estimated tax payments on the tax liability described in B above, the S Corporation's return filed for the prior taxable year must have been for a period of twelve months.

The estimated tax payment calculation should include any tax from the recapture of tax credits. This requirement applies whether or not the S Corporation itself is subject to tax at the corporate level.

S Corporations making the PTE election

S Corporations making the Pass -Through Entity election to pay tax on its pass -through income must make Arizona estimated payments if their PTE income for the previous year was in excess of $150,000. The amount of payments of estimated tax must be an amount that reasonably reflects the S Corporation's PTE tax liability that will be unpaid at the end of the taxable year. Compute the required payment using the PTE tax rate, 2.5% of Arizona taxable PTE income. The estimated payments must be made in 4 equal installments on or before the 15 th day of the 4 th, 6 th, and 9 th months of the taxable year; the 4th and final payment is due by the 15th day of the 1st month following the close of the taxable year.

The Arizona required annual payment of estimated tax for an S Corporation is the smaller of: • Ninety percent of the S Corporation's Arizona PTE tax liability for the current taxable year; or • One hundred percent of the tax due for the previous taxable year. S Corporations subject to tax at the federal level AND making the PTE election

S Corporations having a tax liability at the federal level AND making the PTE election, must separately compute the required estimated payments for the income generating the federal tax liability and the income generating the PTE tax liability.

Separately compute the required minimum payment for the income generating the federal tax liability using the corporate tax rate, 4.9% of taxable income. Also, separately compute the required minimum payment for the income generating the PTE tax liability using the PTE tax rate, 2.5% of taxable income. Total those amounts. This is the total required minimum payment due.

The due dates for the total estimated payment are the due dates for the PTE required payments - the 15th day of the 4th, 6th, and 9th month of the taxable year, and the 15th day of the 1st month following the close of the taxable year.

When submitting the total estimated payment, there is no need to distinguish between the "corporate" payments and the "PTE" payments. The S Corporation may submit one payment that is the sum of both the "corporate" payment and the "PTE" payment.

For additional information, see the instructions for Arizona Form 120/PTE-W and for Arizona Form 220PTE.

Is the S Corporation subject to the Estimated Underpayment Penalty for the 2025 taxable year? See the instructions for Arizona Form 220/PTE.

MAKING ESTIMATED TAX PAYMENTS

S corporations making estimated tax payments for 2026 that expect a 2026 income tax liability of $500 or more must make Arizona estimated income tax payments using EFT. See the Section Payment Electronic Funds Transfer on page 4 for details on making tax payments by EFT.

NOTE: S Corporations that make estimated tax payments by EFT should not submit Arizona Form 120/165ES.

S c orporations making estimated payments for 2026 that expect a 2026 income tax liability of less than $500 may pay by check, e -check, money order, credit card, or they may elect to participate in EFT. See the Section, Payment by Electronic Funds Transfer on page 5 for additional information. If paying by check or money order, complete Arizona Form 120/165ES and include the check or money order with the form.

NOTE: Taxpayers required to make estimated payments via EFT that fail to do so are subject to a penalty of 5% of the amount of the payment not made by EFT. See A.R.S. § 42-1125(O).

For additional information on electronic funds transfer, refer to A.R.S. § 42 -1129 and the related Arizona Administrative Code rules (A.A.C. R15 -10-301 through R15- 10-307) for detailed information. Penalties and Interest

NOTE: If more than one of the penalties described in A, B, or C apply, the maximum combined penalty is 25%.

A. Late Filing Penalty

Without a valid federal or Arizona extension, a return filed after the original due date is subject to the late filing penalty. A return filed after its extended due date is also subject to the late filing penalty. The late filing penalty is 4.5% ( .045) of the amount of tax required to be shown on the return. The penalty period is each month or fraction of a month between the due date of the return and the date the taxpayer filed the return. The maximum penalty is 25% of the tax found to be remaining due.

B. Extension Underpayment Penalty

The S Corporation must pay 90% of the tax liability reported on its return by the original due date of the return. If it does not, the extension underpayment penalty is charged on any late or underpaid extension payments. The extension underpayment penalty is ½ of 1 % (.005) of the tax not paid for each 30-day period or fraction of a 30-day period between the original due date and the date the tax is paid. The

maximum penalty is 25% of the unpaid tax. Taxpayers subject to the extension underpayment penalty are not subject to the late payment penalty described in C below.

C. Late Payment Penalty

The late payment penalty is charged on any amount shown as tax on a return that is not paid by the due date. The late payment penalty is ½ of 1% (.005) of the unpaid tax for each month or fraction of a month that the tax remains unpaid, not to exceed 10% of the unpaid tax.

NOTE Amended Return Filers: I f you voluntarily file an amended return and pay the additional tax due when you file your amended return, the department will not assess the late payment penalty. Exceptions are: • The taxpayer is under audit by the department. • The amended return was filed on demand or request by the department.

Refer to the department's ruling, CTR 09-1, When do Penalties Apply to an Income Tax Return Filed Under an Extension, regarding the application of penalties to returns filed under extension.

D. Information Return Penalty

This form is an information return when no tax liability is due. The penalty for failing to file, filing late (including extensions), or filing an incomplete information return is $100 for each month, or fraction of a month, that the failure continues, up to a maximum penalty of $500.

E. Estimated Tax Underpayment Penalty

The department imposes the underpayment of estimated tax penalty on any late payment or underpayment of a required installment of estimated tax. Refer to Arizona Form 220/PTE, Underpayment of Estimated Tax by Corporations , for further details.

• The S Corporation must complete Arizona Form 220/PTE if it made its estimated tax payments based on either the annualized income installment or adjusted seasonal installment methods, or if it is a large corporation that computed its first required installment based on the S Corporation's tax liability for the prior taxable year. This is required even if no penalty is due.

•• The S Corporation does not have to complete Arizona Form 220/PTE if the S Corporation made its estimated tax payments in four equal installments based on an amount equal to either 90% of the current taxable year's tax liability or 100% of the prior year's tax liability. "Tax liability" means the liability reduced by any refundable tax credits and the claim of right adjustment, if applicable.

The department will compute the estimated tax underpayment penalty and notify the S Corporation of any amount due.

F. Failure to Pay by Electronic Funds Transfer

Corporations that anticipate a tax liability of $500 or more for the taxable year must pay their tax liability by Electronic Funds Transfer (EFT).

Corporations required to pay their tax liability by EFT that fail to do so may be subject to a penalty equal to five percent (5%) of the amount of the payment not made by EFT.

G. Interest

The department charges interest on any portion of the tax not paid by the due date. The department compounds interest annually and applies it in the same manner and at the same time as prescribed by the IRS. The Arizona rate of interest for both underpayments and overpayments for all taxpayers is the federal underpayment rate.

On January 1 of each year, the department adds any interest outstanding as of that date to the principal amount of the tax. It is then a part of the principal amount of the tax and accrues interest until paid.

NOTE: The entire amount of tax, penalties, and interest is due by the original due date of the return.

Arizona Apportionment Methods

There are three apportionment methods for multistate S Corporation income tax returns filed to Arizona: (1) air carrier apportionment; (2) standard apportionment; and (3) sales factor only apportionment.

Air carriers are required to use revenue miles. All other taxpayers may select either the standard or the sales factor only apportionment method.

1. Air Carrier Apportionment

An air carrier is required to use revenue miles to calculate its apportionment ratio. Check Box 1 on line C of page 1, complete Schedule ACA, and include it with your return. Do not complete Schedule A.

2. Standard Apportionment

All non-air carrier taxpayers are allowed to continue to use Arizona's standard apportionment formula, which double - weights the sales factor. Check Box 2 on line C of page 1 and complete Schedule A using the double-weighted sales factor (Arizona sales X 2)/Everywhere sales. Divide the total ratio by four. 3. Sales Factor Only Apportionment

All non-air carrier taxpayers may use Arizona's sales factor only apportionment formula, which is determined by dividing Arizona Sales by Everywhere Sales. Check Box 3 on line C of page 1, complete Schedule A, Section A3, "Sales Factor", lines a through f.

Specific Instructions

Calendar year filers, check the box "calendar year 2025 ". Fiscal year filers, check the box, "fiscal year" and enter the beginning and ending dates for the fiscal year. If this is a short-period return, indicate the beginning and ending dates of the short-period. Check the box if this fiscal year return is based on a 52/53 week taxable year.

Type or print the required information in the name, address, and information boxes on the top of page 1. Include the Business Telephone Number (with area code), and the Business Activity Code (NAICS Code) from the S Corporation's federal return.

If the taxpayer has a foreign address, enter the information in the following order: city, province or state, and country. Follow the country's practice for entering the postal code. Do not abbreviate the country's name.

Enter the S Corporation's employer identification number (EIN). S Corporations that fail to include their EIN may be subject to a penalty.

Box 68 • Check box A, "This is a first return" if this is the S Corporation's first return filed to Arizona. • Check box B, "Name change", if the S Corporation changed its name during the tax year. • Check box C , "Address change", if the S Corporation changed its address during the tax year.

Box 82F

Check box 82F if this return is filed under extension.

Line A If the S Corporation is making the Pass-Through Entity (PTE) election to pay Arizona income tax on its flow-through income at the entity level, check "Yes". If the S Corporation is not making the PTE election, check "No".

Line B

If the S Corporation conducts business within and without Arizona check "Yes". If not, check "No".

Line C - Multistate S Corporations only: If the S Corporation is a multistate S Corporation, check the box indicating its method of apportioning income to Arizona.

• Check Box 1 if the taxpayer used the Air Carrier Apportionment. Complete Arizona Form ACA and include it with this return. • Check Box 2 if the taxpayer used the Standard Apportionment formula. • Check Box 3 if the taxpayer used the Sales Factor Only Apportionment formula.

If the taxpayer is not a multistate corporation, or did not apportion its income to Arizona, leave this line blank.

Line D

Check this box only if the S Corporation elected to be treated as a multistate service provider (MSP) by completing Arizona Schedule MSP and including it with this return. If this box is checked, check the corresponding box, Yr 1 through Yr 5, to indicate the year of the S Corporation's MSP election cycle.

If the S Corporation did not elect MSP treatment, leave this line blank.

Line E

Is this the S Corporation's final Arizona income tax return using this EIN?

• If yes, check "Yes" and check the appropriate box. oo Check Box 1 if the S Corporation is "Dissolved"; or o Check Box 2 if the S Corporation has "Withdrawn" from Arizona; or

oo Check Box 3 if the S Corporation "Merged/Reorganized." If there is a successor corporation, indicate the EIN of the successor corporation in the space provided. • If this is not the S Corporation's final return under this EIN, check "No."

Line F

Will a composite return be filed on Arizona Form 140NR?

• If the S Corporation is not making the PTE election, it may file a composite return for its nonresident shareholders.

• If the S Corporation is making the PTE election and a portion of its nonresident shareholders opt out of its PTE election, it may file a composite return only for those nonresident shareholders provided all qualifying criteria for the composite return are met, including having a minimum of 10 nonresident shareholders included in the composite return.

• If the S Corporation is making the PTE election and all its nonresident shareholders do not opt out of the PTE election, it may not file a composite return.

Check "Yes" if a composite return will be filed on Arizona Form 140NR. If not, check "No."

NOTE: For additional information, see the instructions for Form 140NR on how to complete a composite return.

Marijuana Establishments Only

Only a marijuana establishment licensed or registered by ADHS should fill out line G or line H.

All other S Corporations, go to line 1.

Line G

• Check Box 1 if the S Corporation is licensed by ADHS as an Adult Use only establishment, • Check Box 2 if the S Corporation is licensed by ADHS as a Dual Licensee that has elected to operate on a for -profit basis or • Check Box 3 if the S Corporation is licensed by ADHS as a Dual Licensee that has not elected to operate on a for-profit basis. • Check Box 4 if the S Corporation is registered with ADHS as an NMMD only. Line H

If a box on Line G is checked, enter the registry identification number issued by the ADHS for that marijuana establishment.

Part 1 - Calculation of S Corporation

Tax Due/Overpayment

Line 1 - Total Distributive Income (Loss)

Enter the net total of the pro rata share items of nonseparately computed income (loss) and separately stated income (loss) and deductions (from federal Form 1120S, Schedule K).

Income Subject to Federal and Arizona Corporate Income Taxes

Lines 2 through 4 - Excess Net Passive Income and Capital Gains/Built-in Gains

If the S Corporation was subject to the federal excess net passive income tax, capital gains tax, or built-in gains tax on its federal Form 1120S, it is subject to Arizona corporate income tax on the total of this income. Use the federal worksheet included in the instructions for federal Form 1120S to calculate the amount of excess net passive income and capital gains/built in gains that was subject to federal taxation.

Special Instructions for S Corporations that are Marijuana Establishments Subject to Tax at the Federal Level

• If an S Corporation licensed by ADHS as a Marijuana Facility or as a Marijuana Testing Facility is subject to corporate income tax at the federal level, it is also subject to Arizona corporate income tax. Complete lines 2 through 12 of Arizona Form 120S as instructed. • If an S Corporation licensed by ADHS as a Dual Licensee that made the election to operate on a for- profit basis is subject to corporate income tax at the federal level, it is also subject to Arizona corporate income tax. Complete lines 2 through 12 of Arizona Form 120S as instructed. • If an S Corporation licensed by ADHS as a Dual Licensee that has not made the election to operate on a for-profit basis is subject to corporate income tax at the federal level it is subject to Arizona corporate income on the portion of the net income attributable to its operations as an adult use facility. It is not subject to Arizona corporate income tax on the net income attributable to its operations as an NMMD. o If the source of the income subject to tax at the federal level is attributable to the operations of the Adult Use marijuana facility, complete lines 2 through 13 of Arizona Form 120S as instructed. o If the source of the income subject to tax at the federal level is attributable to the operations of the NMMD marijuana facility, do not complete lines 2 through 13. The S Corporation is not subject to Arizona corporate income tax on that income. o If the source of the income subject to tax at the federal level is attributable to the operations of the S Corporation as both an Adult Use facility and as an NMMD, complete lines 2 through 13.  For Lines 2 & 3 - Enter the total amount of income subject to tax at the federal level less the portion of the income attributable to NMMD operations. • If an S Corporation registered as an NMMD only by ADHS is subject to corporate income tax at the federal level, it is not subject to Arizona corporate income tax. Do not complete lines 2 through 12 of Arizona Form 120S.

Line 2 - Excess Net Passive Income

Enter the amount of excess net passive income that was subject to federal corporate income tax.

Line 3 - Capital Gains/Built-In Gains

Enter the amount of capital gains/built in gains that was subject to federal corporate income tax.

Line 4 - Total Federal Income Subject to Corporate

Income Tax

Add line 2 and line 3. Enter the total on line 4.

• 100% Arizona S Corporations, check box 4a. Skip to line 11. • Multistate S Corporations, continue to line 5.

NOTE: • An S Corporation that has income from business activity that is taxable entirely within Arizona is a 100% Arizona S Corporation. • An S Corporation that has income from business activity taxable in more than one state is a multistate S Corporation.

Lines 5 through 10 - Apportionment Computation Multistate S Corporations Only

Any S Corporation that has income from business activity that is taxable both within and without Arizona (multistate S Corporation) must allocate and apportion its net income according to the Uniform Division of Income for Tax Purposes Act (UDITPA), A .R.S. §§ 43-1131 through 43-1150. See the instructions beginning on page 10 for more detailed information regarding apportionment of income.