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Wisconsin Department of Revenue

Withholding and Tax Filing Information Related to Wisconsin-Minnesota Income Tax Reciprocity Termination

Revised - January 20, 2010

On Friday, September 18, 2009 the income tax reciprocity agreement between Minnesota and Wisconsin was terminated by Minnesota effective for taxable years beginning after December 31, 2009. This change does not impact the 2009 tax return.

Secretary Roger M. Ervin issued a statement about the agreement, available here.

NEW - Secretary Roger M. Ervin authorizes a special withholding arrangement for employers of Wisconsin residents working in Minnesota.

Information for Workers

  1. Wisconsin residents working in Minnesota
  2. Minnesota residents working in Wisconsin

Information for Employers

  1. Wisconsin employers that employ Minnesota residents
  2. Minnesota employers that employ Wisconsin residents
  1. I am a resident of Wisconsin working in Minnesota. How does the ending of the reciprocity agreement affect me?

    On January 1, 2010, your Minnesota employer will begin withholding Minnesota income taxes from personal service income, such as salaries, wages, commissions and fees.

    Your Minnesota employer will use the Federal Form W-4, Employee's Withholding Allowance Certificate, to determine the amount of Minnesota income tax to be withheld from your wages. Contact your Minnesota employer if you have questions about Form W-4.

    REVISED - Will my employer withhold Wisconsin tax from my wages?

    No, Wisconsin income taxes will not be withheld from that income. See special withholding arrangement announced by Secretary Roger M. Ervin.

    Will I need to make Wisconsin estimated tax payments?

    Every situation is different but generally, the credit for income tax paid to Minnesota will offset the Wisconsin income tax on the Minnesota wages so estimated tax payments will not be required. However, if you have income not subject to withholding such as interest, dividends, capital gains, unemployment compensation, etc., you may need to make estimated tax payments.

    What do I need to do?

    • File a 2009 Wisconsin income tax return as you have done in the past. No changes are necessary for your 2009 tax return because the effective date is January 1, 2010.

    • File a 2010 Minnesota income tax return in 2011 as a nonresident. All personal service income earned in Minnesota will be reported to Minnesota.

    • File a 2010 Wisconsin income tax return (Form 1) in 2011. You will report all income received, including wages earned in Minnesota, on your Wisconsin return. Wisconsin will allow a credit for the net income tax paid to Minnesota on income that is taxed by both Wisconsin and Minnesota.

    Questions?

    If you have questions about Wisconsin income tax, contact the Wisconsin Department of Revenue:

    If you have questions about Minnesota income tax, contact the Minnesota Department of Revenue:

  2. I am a resident of Minnesota working in Wisconsin. How does the ending of the reciprocity agreement affect me?

    On January 1, 2010, your Wisconsin employer will begin withholding Wisconsin income taxes from your personal service income such as salaries, wages, commissions and fees earned.

    What do I need to do?

    • File a Form WT-4, Wisconsin Withholding Exemption Certificate, with your Wisconsin employer. Form WT-4 is used to determine the amount of Wisconsin income tax to be withheld from your wages. Contact your Wisconsin employer if you have questions about the completion of Form WT-4.

    • File a 2009 Minnesota income tax return as you have done in the past. No changes are necessary for your 2009 tax return because the effective date is January 1, 2010.

    • File a 2009 Wisconsin nonresident income tax return (Form 1NPR) only if Wisconsin income tax was withheld in error from wages earned in Wisconsin. Attach Wisconsin Form W-222 and a copy of your Minnesota income tax return to receive a refund of the Wisconsin tax withheld.

    • File a 2010 Wisconsin nonresident income tax return (Form 1NPR) in 2011 if your Wisconsin income was $2,000 or more. All wages earned in Wisconsin are taxable by Wisconsin.

    • File a 2010 Minnesota income tax return in 2011. You will report all of your income received, including wages earned in Wisconsin, on your Minnesota tax return. Minnesota may allow a credit for income taxes paid to Wisconsin on income that is taxed by both Wisconsin and Minnesota.

    Questions?

    If you have questions about Wisconsin income tax, contact the Wisconsin Department of Revenue:

    If you have questions about Minnesota income tax, contact the Minnesota Department of Revenue:

  3. I am a Wisconsin employer that employs Minnesota residents. How does the ending of the reciprocity agreement affect me?

    On January 1, 2010, you must begin withholding Wisconsin income taxes on wages of Minnesota residents working in Wisconsin. You should ask these employees to complete a Form WT-4, Wisconsin Withholding Exemption Certificate. Form WT-4 is used to determine the amount of Wisconsin income tax to be withheld from employee wages.

    You may no longer accept Form W-222, Statement of Minnesota Residency. Form W-222 was previously used by Minnesota residents working in Wisconsin to claim exemption from withholding of Wisconsin income taxes.

  4. I am a Minnesota employer that employs Wisconsin residents. How does the ending of the reciprocity agreement affect me?

    1. Minnesota Withholding – On January 1, 2010, you must begin withholding Minnesota income taxes on the wages of Wisconsin residents working in Minnesota. Use federal Form W-4, Employee's Withholding Allowance Certificate, to determine the amount of Minnesota income tax to be withheld from your employees' wages.

    2. REVISED - Wisconsin Withholding – Employers are not required to withhold Wisconsin income tax from wages of Wisconsin residents employed in Minnesota. See special withholding arrangement announced by Secretary Roger M. Ervin.

      3. Note: Minnesota employers who no longer have a withholding obligation for Wisconsin, should inactivate their Wisconsin withholding tax account.

      Questions?

      If you have questions about Wisconsin withholding tax, contact the Wisconsin Department of Revenue:

Last updated January 20, 2010