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Individual income tax reciprocity with Wisconsin ends effective January 1, 2010
Minnesota will end individual income tax reciprocity with Wisconsin effective January 1, 2010. As a result, Minnesota and Wisconsin residents who work across the border must file returns in both states for 2010 and beyond if they meet minimum filing requirements.This change does not impact 2009 income tax returns for individual taxpayers.Revenue Commissioner Ward Einess explained why Minnesota decided to terminate income tax reciprocity in a statement on September 18. Click here to view press release.The Department of Revenue will provide additional information for affected Minnesota taxpayers and businesses in the next few weeks. In the meantime, please refer to the information below.Information for Individuals Minnesota residents who work in Wisconsin
Wisconsin residents who work in MinnesotaInformation for employersMinnesota employers that employ Wisconsin residents
Wisconsin employers that employ Minnesota residentsIf you have questionsIf you have questions about Minnesota tax, contact the Minnesota Department of Revenue: Individual Income TaxWithholding TaxIf you have questions about Wisconsin tax, contact the Wisconsin Department of Revenue:Individual Income TaxWithholding Tax Minnesota residents working in Wisconsin
On January 1, 2010, Wisconsin will start taxing your personal service income earned in Wisconsin such as wages, salaries, tips, commissions, fees, or bonuses. In most cases, Wisconsin employers will withhold Wisconsin tax from your pay. For 2009 (with reciprocity agreement), you need to:- File a Wisconsin Withholding Exemption Certificate, Form WT-4, with your Wisconsin employer by the end of 2009. This form is used to determine the amount of Wisconsin income tax to be withheld from your paychecks. Check with your employer if you have questions about how to complete form WT-4.
- File a 2009 Minnesota income tax return as you have done in the past. No changes are necessary for your 2009 return because reciprocity is in effect until December 31.
- File a Wisconsin income tax return for nonresidents, Form 1NPR, only if Wisconsin income tax was withheld in error from 2009 wage income. Attach Wisconsin Form W-222 and a copy of your 2009 Minnesota income tax return to receive a refund of Wisconsin tax withheld.
For 2010 (without reciprocity agreement), you need to:- File a 2010 Wisconsin income tax return for nonresidents, Form 1NPR, if your Wisconsin income meets minimum filing requirements. All personal income earned in Wisconsin is taxable by Wisconsin.
- File a 2010 Minnesota income tax return. You will report all income received on your Minnesota return, including personal service income earned in Wisconsin. When filing Minnesota Form M1, you will receive a credit for taxes paid to Wisconsin on income that is taxable in both states.
- Make 2010 estimated tax payments in Minnesota if you expect to owe at least $500 in Minnesota income tax after claiming the credit for income taxes paid to Wisconsin. Income tax rates are generally similar in both states. However, you may end up owing Minnesota tax if you have other types of income that are subject to Minnesota tax such as dividends, interest or pension income. See Minnesota Estimated Tax for more information.
Wisconsin residents working in Minnesota
On January 1, 2010, Minnesota will start taxing your personal service income earned in Minnesota such as wages, salaries, tips, commissions, fees, or bonuses. In most cases, Minnesota employers will withhold Minnesota tax from your pay. You can no longer file Form MWR, Reciprocity Exemption/Affidavit of Residency, to be exempt from having Minnesota tax withheld from your personal service income earned in Minnesota.For 2009 (with reciprocity agreement), you need to:- File a 2009 Wisconsin income tax return as you have done in the past. No changes are necessary for your 2009 return because reciprocity is in effect until December 31.
- Your Minnesota employer will use the Federal Employee’s Withholding Allowance Certificate, Form W-4, to determine the amount of Minnesota income tax to be withheld from your paycheck. Contact your Minnesota employer if you have questions about form W-4.
For 2010 (without reciprocity agreement), you need to:- File a 2010 Minnesota income tax return as a nonresident using Form M1 and Schedule M1NR. Even if you do not meet the minimum filing requirements, you may need to file Form M1 to request a Minnesota tax refund. All personal service income earned in Minnesota is taxable by Minnesota.
- File a 2010 Wisconsin income tax return. You will report all income received on your Wisconsin return, including personal service income earned in Minnesota. You will receive a credit for net income taxes paid to Minnesota on income that is taxable in both states.
- Make 2010 estimated tax payments in Wisconsin if you expect to owe at least $200 in Wisconsin income tax after claiming the credit for income taxes paid to Minnesota. Income tax rates are generally similar in both states. However, you may end up owing Wisconsin tax if you have other types of income that are subject to Wisconsin tax such as dividends, interest or pension income. See Wisconsin Estimated Tax for more information.
Minnesota employer that employs Wisconsin residents
On January 1, 2010, you must begin withholding Minnesota income taxes on personal service income of Wisconsin residents working in Minnesota. Use the Federal Employee's Withholding Allowance Certificate, Form W-4, to determine the amount of Minnesota income tax to be withheld from your employees' paychecks.If you no longer have a withholding obligation for Wisconsin, you should inactivate your Wisconsin withholding tax account effective December 31, 2009. Wisconsin employer that employs Minnesota residents
On January 1, 2010, you must begin withholding Wisconsin income taxes on personal service income of Minnesota residents working in Wisconsin. You should ask these employees to complete a Wisconsin Withholding Exemption Certificate, Form WT 4. Form WT 4 is used to determine the amount of Wisconsin income tax to be withheld from employee paychecks.
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