The following is a list of common errors to avoid when filing your combined return. Avoiding these errors will ensure your return is quickly processed by the department.
Things you should do:
- Attach the following commonly missed items to your return:
- All combined returns must have a copy of the complete federal return for each member of the combined group. If there are more corporations in the Wisconsin combined group than there are in the federal consolidated return, you must also attach the federal return for the non-consolidated corporations.
- Supporting schedules for Schedules V & W that show the additions and subtractions from income for each member of the combined group. Do not group line items or report all of the information on one line.
- Form 4A-1 or 4A-2, or an acceptable substitute, must be submitted for each member of the combined group. Make sure to report the correct information on each line item description. Do not group line items or report all of the information on one line.
- Credit certifications must be attached to return for credits that require certification for eligibility.
- A member's Schedule 2K-1 or Schedule 3K-1 if the member had tax withheld on its portion of income from a pass-through entity or if the member is claiming credits from the pass-through entity. The amount of tax withheld and paid by the pass through entity should be reported on the member's Form 4M, Line U. It is also helpful to enter the FEIN of the pass-through entity on Line U to expedite the processing of the return.
- Add credits to income on Schedule V as required. Most refundable and nonrefundable credits must be added to income in the year in which the taxpayer is first eligible to compute the credit. See Wisconsin Tax Bulletin 178 for specific details.
- Add to income the amount of state taxes, including state franchise taxes, that are value-added taxes, single business taxes or taxes on or measured by all or a portion of net income, gross income, gross receipts or capital stock that are deducted on the federal return. Note: Foreign taxes are deductible in Wisconsin unless the income on which the tax is based is not included in Wisconsin taxable income.
- Add to income the amount of interest on U.S. government obligations that was excluded from federal taxable income. Interest on U.S. government obligations should not be excluded from Wisconsin income.
- Use net business losses (NBLs) in the proper order. It is important to report the proper type of loss on the proper line of the return (Part II of the 4M). A member must use losses to offset income in the following order:
- For 100% Wisconsin combined groups only: sharing of current year unitary losses.
- Its own pre-2009 NBL carryforward to offset its own Wisconsin net income from separate entity items.
- Its own pre-2009 NBL carryforward to offset its share of the Wisconsin combined group's Wisconsin income.
- Its own post-2009 shareable NBL carryforward to offset its share of the Wisconsin combined group's Wisconsin income.
- Its share of post-2009 shareable NBL carryforward from other combined group members to offset its share of the Wisconsin combined group's Wisconsin income.
- Its share of shareable pre-2009 NBL carryforward from other combined group members up to the allowable 5% amount to offset its share of the Wisconsin combined group's Wisconsin income.
Note: If you are claiming NBLs from a company that merged into one of the members, attach a note to the return providing merger information. NBLs are tracked on a per member basis regardless of whether the NBLs are shareable or not.
- Have the Designated Agent make all of the estimated payments and return payments. If a different member makes a payment (or has a carryover payment from a separately filed prior year's return), that member's Form 4M should have a check mark (√) on line T. In addition, that member should fill in Part IV of Form 4M.
Things you should not do:
- Do not submit a Form 4M for a corporation that does not exist. Form 4M's that are created to show the elimination transactions of the combined group are not necessary and will interfere with processing the return. However, intercompany sales should be eliminated on the Form 4A-1 for each company to show the proper amount of sales used to calculate the apportionment percentage for each member.
- Do not submit a sub-consolidated Form 4M for a group of corporations. Each separate corporation (member) must have its own Form 4M.
- Do not deduct federal fuel taxes that were required to be included in federal taxable income as a result of claiming the federal fuel tax credit. The amount included in federal taxable income is the same amount that should be included in Wisconsin taxable income.
- Do not forget the Economic Development Surcharge. If one member of the combined group has nexus with Wisconsin, all members of the combined group are considered to have nexus with Wisconsin for purposes of the economic development surcharge. The surcharge is imposed on every member that has $4 million or more of worldwide gross receipts and it is computed based on a member's portion of the combined income. If a member has over $4 million of gross receipts, but does not have any combined income, a minimum $25 surcharge still applies. See Publication 400, Wisconsin's Economic Development Surcharge for more details.
December 30, 2013