The following are questions and answers from the DOR/IRS Working Together Seminars.
Health Insurance Benefits for Adult Children
Wisconsin has adopted the federal tax treatment of health insurance benefits provided to an adult child who has not attained the age of 27 as of the end of the tax year. These provisions are effective for taxable years beginning on or after January 1, 2011. For more information, please refer to the article Treatment of Health Insurance Benefits for Adult Children
Question: Does this new tax treatment affect how employers report wages for unemployment insurance purposes?
Answer: No. Based on information received from the Department of Workforce Development, employer-paid medical benefits, including imputed income related to accident or health insurance coverage provided to an adult child who has not attained the age of 27 at the end of 2011, are excluded from reportable wages for unemployment insurance purposes. Therefore, the new Wisconsin tax treatment does not affect how employers report wages for unemployment insurance.
Business Tax Credits
Job Creation Deduction
Question: Am I correct that an employer who changes an employee from a part- time position to a full- time position will be eligible for the new job creation deduction for that employee?
Answer: Yes, if the employer's total number of full-time equivalent employees increased. The job creation deduction is based on the increase in the number of full-time equivalent employees employed in Wisconsin during the taxable year beginning in 2011 over the number of full-time equivalent employees employed in Wisconsin during the taxable year beginning in 2010. These numbers are from the unemployment insurance wage reports filed with the Department of Workforce Development, or based on an alternative computation as explained in the instructions to Wisconsin Schedule JC when unemployment insurance wage reports are not filed.
Question: A farmer increases his or her workforce in 2011. The farmer is not required to file quarterly unemployment insurance wage reports with the Department of Workforce Development. Is the farmer eligible for the job creation deduction?
Answer: Yes, if the farmer's total number of full-time equivalent employees increased. For a taxable year during which a taxpayer is not required to file quarterly unemployment insurance wage reports, the average employee count is computed on Wisconsin Schedule JC. The taxpayer will add the number of full-time equivalent employees employed on January 31, April 30, July 31 and October 31 within the taxable year and divide that total number by 4. If the farmer has full-time equivalent employees for only one quarter, the farmer would count the number of full-time equivalent employees employed in Wisconsin for that one quarter. A January 31, April 30, July 31, or October 31 that does not occur within the taxable year is disregarded for purposes of the computation. See sec. Tax 3.05, Wis. Adm. Code (November 2011 Register) https://docs.legis.wisconsin.gov/code/admin_code/tax/3/05.
New Fact Sheet: www.revenue.wi.gov/taxpro/fact/jobcreation.pdf
Form & Instructions
Business Relocation Deduction
Question: A university has a visiting professor that earns consulting income in Wisconsin. The professor has no employees and makes no taxable sales that require registering her business in Wisconsin. The consulting income is reported on federal Schedule C. Is the professor eligible for the business relocation deduction?
Answer: If the professor has no employees and pays no wages, she does not qualify for the relocated business deduction because she did not move 51% of the workforce payroll or $200,000 of workforce wages to Wisconsin. If the professor has employees and moved 51% of the workforce payroll or at least $200,000 of workforce wages to Wisconsin and the professor has not done business in Wisconsin for the two years preceding the taxable year in which she begins doing business in Wisconsin, she would qualify for the relocation business deduction.
New Fact Sheet: www.revenue.wi.gov/taxpro/fact/relocated.pdf
Capital Gain Exclusion/Deduction
Question: What does a business have to do to be certified by the Wisconsin Economic Development Corporation (WEDC), formerly Department of Commerce?
Answer: A business or its representative should contact the Regional Account Manager for WEDC at http://wedc.org/contact-us. The Regional Account Manager will discuss what program will best fit the business's needs and the Regional Account Manager will then begin the application process. Once the application and verification process is completed, the Regional Account Manager will provide the business with the verification certificate that should be attached to the business's tax return when claiming the tax credit.
New Fact Sheet Available: www.revenue.wi.gov/taxpro/fact/capitalgain.pdf
Federal Audit Reports
Question: Does the IRS send CP-2000 records to DOR when they are first issued or after the IRS determination is final?
Answer: In most instances, the IRS does not send a CP-2000 record to DOR until the IRS determination is final. However, the IRS has identified a programming error where some CP-2000's were sent to DOR prematurely. The IRS plans to correct that error. When that correction will occur is based on other IRS programming priorities.
Question: What should be attached to an amended return when there is a federal audit report or CP-2000 adjustment?
- A copy of the federal audit report or CP-2000 adjustment notice, and
- Any additional federal or Wisconsin schedules related to the change that will explain the adjustments being made. For example:
- If the federal audit report/CP-2000 adds income from sales of securities, attach revised Schedules D and WD.
- If the adjustments change the amounts added to or subtracted from federal adjusted gross income to arrive at Wisconsin income, indicate what those changes to Wisconsin modifications were.
Question: Does an e-filed Form 1NPR get rejected if filed by a couple where one spouse has an ITIN?
Answer: No, Wisconsin accepts an e-filed Form 1NPR that has an ITIN. However, under the legacy e-file program (i.e., non-MeF), only certain Form 1NPRs are accepted. Electronic filing is allowed for nonresidents and part-year residents with income and credits consisting of wages, salaries, tips, interest, ordinary dividends with Wisconsin income tax withheld and Wisconsin estimated tax payments made, school property tax credit, armed forces tax credit, working families tax credit, married couple credit, and itemized deduction credit.
For returns e-filed through the new modernized e-file (MeF) program, most Form 1NPRs are accepted, including returns with ITINs and from non-resident aliens.
Question: If a taxpayer did not make an election to receive Form 1099-G electronically, can the taxpayer still view Form 1099-G on DOR's website?
Answer: Yes, a taxpayer can view and print his or her Form 1099-G online as long as he or she responds correctly to the security questions.
Question: Will a practitioner get an email notification that Form 1099-G is available for each client or one email listing for all clients?
Answer: If the practitioner used a single email address when making the election for all clients, the practitioner will receive one email notification saying that the Form 1099-G information is available online.
Question: Is the child care deduction added back to household income when computing household income for homestead credit?
Answer: No. There is no provision to include the amount of the deduction in household income. The subtraction for child care expenses can reduce Wisconsin income below zero. Like the medical insurance deduction, the Wisconsin income as computed will carry over to the homestead credit claim.
Question: How is household income determined for homestead credit purposes when multiple unmarried adults live together?
Answer: Each unmarried adult is considered a separate "household" for homestead credit purposes. Therefore, each adult should compute their own household income accordingly. Persons sharing a homestead must complete the Rent Certificate's Shared Living Expenses Schedule if they do not pay the rent equally.
My Tax Account (MTA)
Question: Why do we have to exit from the confirmation page to print?
Answer: Beginning on December 6, 2011, you will be able to print the return from the confirmation page.
Question: Why can't I print out my return or refund claim to review before I file it?
Answer: There is no return to print until it is submitted. The data entered in each step is compiled into a return once submitted. You may screen print your entry screens using your browser's print button.
Question: Can Form W-2s be submitted electronically using MTA?
Answer: Beginning in early January, Form W-2s may be submitted electronically through MTA. Users will enter employee information into a fill-in form and submit as part of completing a Form WT-7 (Annual Reconciliation). This e-file application is intended for those filers who have very few W-2s (e.g., under 10), since most with larger numbers have other means to electronically submit without re-entering the data.
Question: Can a third party request a payment plan on behalf of a client through MTA?
Answer: No. However, DOR is considering allowing such a request in the same manner a third party can request an appeal or register for a permit on behalf of a client. More information will be posted to the practitioner list serv when the functionality becomes available.
Question: Can a person initiate an offset of his or her tax refund, including a federal refund, to pay a tax debt?
Answer: There is no need for a person to initiate his or her own offset of a tax refund to pay a tax debt or debt owed to another state agency or local government. DOR automatically offsets a refund against tax debt owed to the department. Other state agencies and local governments are authorized to send their debt to DOR for collection. Once the debt is referred to DOR for collection, refunds are automatically offset against this debt after DOR tax debt has been paid.
Sales Tax - Buy One Get One Free (BOGOF)
Question: How do the new BOGOF provisions apply to a tavern?
Answer: Tavern A offers a drink special in which a person who purchases one alcoholic beverage and receives a second alcoholic beverage for no additional charge. Customer B purchases one glass of wine for $5 and receives a second glass of wine for no additional charge. The $5 charge by Tavern A for the glass of wine is subject to Wisconsin sales or use tax. Tavern A may purchase all of the wine transferred in this transaction without tax for resale.
Question: What is DOR's policy on voluntary disclosure for non-filers?
Answer: A person with nexus in Wisconsin who makes a voluntary disclosure will generally be requested to file returns for the "current year" and the four preceding years, assuming a liability existed in those years. "Current year" is a year for which the return is not yet due. "Due date" is the unextended due date of the return. If an unintentional misrepresentation of facts is discovered, the person will be requested to file returns for the current year and the six preceding years, assuming a liability existed in those years.
For more information, please read the Voluntary Disclosure, Unfiled Returns article in Voluntary Disclosure: Unfiled Returns and the Voluntary Disclosure Frequently Asked Questions in Voluntary Disclosure
Filing Paper Tax Forms
Reminder: If you prepared your federal and Wisconsin return using a software program, but choose to print the Wisconsin return and mail it, make sure that the return mailed does not include Form W-RA. Including Form W-RA will delay the processing of the return.
Questions we are still researching:
- Person is using solar, wind or biogas products that are producing excess energy. Utility is buying that energy. Is this taxable income?
- Questions about the tax treatment of on-line discount coupons.
December 5, 2011