Arizona Self-Employed — Schedule C, Form 140/140-SBI & TPT-2

Establish the client's residency status, entity type, and whether the SBI election (Form 140-SBI) is advantageous. Confirm the business was active in Arizona during the tax year and identify all income streams. Determine whether the client owes Arizona TPT registration based on business activity.

Assemble all business income (gross receipts including any TPT passed to customers — do not net TPT against revenue) and deductible expenses on Schedule C. Compute self-employment tax on Schedule SE (15.3% on net SE income up to the Social Security wage base; 2.9% Medicare above). Identify the §199A QBI deduction eligibility and the SE health insurance above-the-line deduction.

Evaluate whether filing Form 140-SBI (Arizona Small Business Income Tax Return) alongside Form 140 produces a lower combined Arizona tax liability. Under A.R.S. §43-1701 et seq., Arizona small business income (net profit from Schedule C, plus Schedule E and F pass-throughs) is taxed at a flat 2.5% on Form 140-SBI rather than being included in the regular Form 140 computation. Since both forms carry the same 2.5% flat rate as of 2023, the election is primarily relevant for taxpayers with large wage income on Form 140 where deduction phaseouts or other adjustments might otherwise increase the effective rate — confirm the math for the specific client.

If the client's business activity falls within a taxable Arizona TPT classification (Retail §42-5061, Restaurant §42-5074, Personal Property Rental §42-5071, Prime Contracting §42-5075, etc.), confirm ADOR TPT registration, assign correct business class codes and region codes, and prepare or review Form TPT-2 filings. Note that TPT paid to ADOR is a deductible Schedule C expense and must not be netted against gross receipts.

Compute Arizona estimated tax due for the current year using Form 140ES and verify that prior-year quarterly payments were sufficient to avoid the underpayment penalty under A.R.S. §43-582. Arizona conforms to the federal safe-harbor rule: 100% of prior-year Arizona tax liability avoids penalty. Estimated payments are due April 15, June 15, September 15, and January 15.

Finalize and file federal Form 1040 with Schedules C, SE, and applicable forms, and Arizona Form 140 (plus 140-SBI if elected). If additional time is needed, file Arizona Form 204 (Application for Filing Extension) by April 15 — Arizona grants an automatic 6-month extension to October 15, but any tax due must be paid by April 15 to avoid the late-payment penalty of 4.5% per month (up to 25%) and interest at the federal short-term rate plus 3 points per A.R.S. §42-1123. E-file via AZTaxes.gov for income tax or use a paid preparer.