Withholding Tax Update - Wisconsin Department Of Revenue

WITHHOLDING TAX UPDATE

December 2012

If required to report a difference on the Form W-2, employers must either:

• Include the amount that is taxable for Wisconsin purposes, but not taxable for federal purposes, in Box 16 of the

Form W-2, or

• Provide the employee with a supplemental “Wisconsin Only” Form W-2 with the taxable benefits shown in Box 16.

HEALTH CARE BENEFITS FOR ADULT CHILDREN UNDER AGE 27

Effective for taxable years beginning on or after January 1, 2011, Wisconsin adopted the federal provisions relating to

the 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.

More information on the treatment of health care benefits for adult children is available at:

revenue.wi.gov/taxpro/news/111107.html.

TREATMENT OF HEALTH SAVINGS ACCOUNTS (HSAs)

Effective for taxable years beginning in 2011 and after, Wisconsin follows the federal provisions relating to HSAs. The

only difference is the imposition of penalties. The Wisconsin penalty for excess contributions that are not withdrawn is

equal to 33 percent of the federal penalty. The Wisconsin penalty for distributions not used for qualified medical expenses

is 33 percent of the federal 20 percent penalty.

For more information on the treatment of HSAs, go to revenue.wi.gov/taxpro/fact/healthsavings.pdf.

RECIPROCITY AGREEMENTS

Wisconsin has reciprocity agreements with Illinois, Indiana, Kentucky, and Michigan. Persons who employ residents of

those states are not required to withhold Wisconsin income taxes from wages paid to such employees. Written verification

is required to relieve the employer from withholding Wisconsin income taxes from such employee’s wages.

Form

W-220,

Nonresident Employee’s Withholding Reciprocity

Declaration, may be used for this purpose. For further information on

reciprocity, see

Publication

121, Reciprocity.

While Wisconsin does not have a reciprocity agreement with Minnesota, there is a special withholding arrangement for

employers of Wisconsin residents working in Minnesota. Wisconsin withholding will not be required when:

• The employee is a legal resident of Wisconsin when the wages are earned in Minnesota, and

• The wages earned are subject to MN withholding and also Wisconsin withholding

For additional information regarding, this special withholding arrangement, visit revenue.wi.gov/taxpro/news/100120.html.

RETIREMENT AND PENSION PAYMENTS EXEMPT FROM INCOME TAX WITHHOLDING

Pension and retirement income do not fall within the definition of wages under Wisconsin law. Therefore, withholding is

not required on retirement and pension payments. However, the recipient may request that the payer withhold Wisconsin

income tax from such payments. The request must be in writing and the amount withheld from each payment must be $5

or more.

If Wisconsin income tax is not withheld, the recipient may be required to make estimated tax payments. Generally,

individuals that expect to pay $200 or more with their income tax return must make estimated tax payments. Individuals

may make estimated payments online at https://tap.revenue.wi.gov/pay.

126, How Your Retirement Benefits are Taxed for additional information.

See

Publication

ELECTION WORKER EXEMPTION FROM INCOME TAX WITHHOLDING

Wages paid to an election worker are not subject to income tax withholding. However, all wages earned by the election

worker are subject to income tax.

Wisconsin Treatment

Wages paid to election workers for services performed in national, state, county, and municipal elections are not subject to

Wisconsin income tax withholding. Employers must report payments of $600 or more to election workers on Form W-2.

Do not use federal Form 1099 or Wisconsin Form 9b.

Withholding Tax Update - Wisconsin Department Of Revenue - 2012 Page 4

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