The Tax Reciprocity Deal Could Be Happening for Minnesota & Wisconsin

Published On: 12th May 2015

From the internet

It has been the topic of conversation for quite some time – tax reciprocity for Minnesota and Wisconsin. Now the deal could be coming to fruition.

The settling of this challenge could make tax time simpler for those living in one state and working in the other. It is the workers who have been caught in the middle of this feud that has been ongoing since 2000. Before that, the agreement had been in place for 41 years. It was terminated when Tim Pawlenty was governor.

The then governor had argued that the reason was due to there being an argument about the amount of money that was due in the agreement. The tensions were eased in 2011 by Wisconsin when they paid nearly $60 million to Minnesota.

Even with payment of that debt, the chance of there being an agreement was still in limbo, although a resolution was almost reached twice. Minnesota demanded $6 million to recoup what it would lose in a new deal and that was the deal breaker that put the entire thing back on the table.

Minnesota says it is the income tax rate disparities that have led to the gap, but Wisconsin doesn’t necessarily like the idea of sending money to Minnesota in order to adjust for their tax amount. Wisconsin, however, has conceded to make quarterly estimates instead of making payments after tax season.

The $6 million demand from Minnesota is the result of there being higher tax rates for the middle class in Wisconsin and there are more Wisconsin residents working in Minnesota than Minnesotans working in Wisconsin.

One Minnesota rep has a plan to drop the entire $6 million stipulation. At first, he was able to drop $1 million from it when he succeeded in passing a measure in 2011.

Nonetheless, the agreement is that the deal would be ideal for taxpayers in both states, making tax season easier on them because they wouldn’t have to file both forms. This would also make paying taxes easier for them.

If the states reach an agreement, they will have to do so by September in order to inform businesses about the change so that they can implement the change in their 2016 payrolls. It is too late for such a change to be implemented for the 2015 tax season, as businesses have to have time to update their payroll programs.

Wisconsin currently has agreements with a number of states, including some that do not border them. Minnesota has agreements with North Dakota and Michigan.