WI Income Tax Reciprocity
Income tax reciprocity terminated between Minnesota and Wisconsin
Workers that live in one state but work in another will have to file returns for both states.
Effective January 1, 2010, Minnesota will terminate its income tax reciprocity agreement with Wisconsin. Employers will only be allowed to withhold taxes for the state in which the employee works and will not be allowed to withhold taxes for the employee’s home state, when different. This will require individuals that live in one state, but work in the other to file state income tax returns in both Minnesota and Wisconsin.
History
The reciprocity agreement was originally enacted in the late 1960s to make filing taxes easier for the employees. More than twice as many Wisconsin residents work in Minnesota than Minnesota residents in Wisconsin. Under the agreement, the State of Wisconsin reimbursed the State of Minnesota for the income tax it collected from Minnesota residents.
Taxes and revenue
In 2010, Minnesota residents who work in Wisconsin may see an overall increase to the amount of taxes they owe, due to Wisconsin’s overall higher tax rates. Wisconsin officials say that Wisconsin residents who work in Minnesota will be credited for taxes they pay in Minnesota, so they will not owe more in total taxes.
Minnesota officials estimate that the state will see a short-term increase in revenue in part due to the quicker payment: $43 million in fiscal year 2010 and $88 million in fiscal year 2011 as a result of repealing the agreement.
Previously, Wisconsin reimbursed Minnesota roughly 17 months after collecting the taxes.
Employees may wish to consult with a tax advisor to make sure they understand their filing requirements.
Disclaimer
This document is provided for informational and educational purposes only. It is not intended to, nor does it, provide any form of legal advice regarding the subject matter of the documents. You should not take any actions on the basis of this document, but instead should seek legal advice regarding your issues.
