2012 Tax Updates for Tax Professionals - Questions & Answers

The following is a list of questions (with answers) that were raised to Wisconsin Department of Revenue staff at various Wisconsin Tax Update presentations held in October and November 2012.

INDIVIDUAL INCOME TAX

  1. Can I file my Wisconsin income tax return as head of household if my spouse files married filing separately?

    To use the head of household filing status for Wisconsin purposes, you must qualify to file your federal income tax return using the head of household or qualifying widow(er) with dependent child filing status. Use of this filing status is generally restricted to unmarried individuals, but certain married persons who lived apart from their spouses for the last 6 months of the tax year may also qualify. See the instructions for your federal return for complete details.

  2. A Wisconsin subtraction is allowed for long-term care insurance. The subtraction is limited by Wisconsin adjusted gross income on line 5 of Form 1 less certain adjustments on lines 6-11 of Form 1. Is the subtraction further limited by a dollar amount per year?

    No. Use the worksheet in the Form 1 instructions. The only limitations are provided in that worksheet. It's possible that a person who pays a large, one-time lump sum for long-term care insurance will be able to subtract all of that lump-sum payment.

  3. I would like to contribute to my step-grandchild's Edvest account. Is my contribution (up to $3,000) deductible for Wisconsin income tax purposes?

    No. The law requires that the beneficiary of the Edvest account be the claimant's child, grandchild, great-grandchild, niece or nephew.

  4. In Wisconsin Tax Bulletin 175, page 14, a tax release describes the tax treatment of gambling winnings, and demonstrates how a nonprofessional gambler computes his or her taxable gambling winnings for Wisconsin purposes. How does an individual who electronically files report the gambling winnings reported on Form W-2G and the related session losses?

    The individual should enter in the e-file software used the information from Form W2-G as reported. The gross winnings should carry forward to Form 1040, line 21 Other income). The software also should allow you to create a schedule or worksheet for multiple entries on Form 1040, line 21. Enter on the schedule or worksheet any other gambling. Also enter as a negative amount, the session wager(s) placed during the same session the winnings occurred. The net winnings reporting on line 21 will carry forward as federal adjusted gross income to Wisconsin Form 1.

    The IRS determination on reporting net session income as described in the tax release is available at irs.gov/pub/irs-utl/am2008011.pdf.

  5. An individual goes to a race track and places wagers on races occurring at the track and simulcasts intermittently from 9 a.m. to 4:00 p.m. The individual remains in the viewing/betting area, except for short breaks to get a beverage or use the restroom. What is the gambling session? What if the person leaves the viewing/betting area from 11:30 a.m. to 12:30 p.m. for lunch?

    The gambling session given the first set of facts is 9:00 a.m. to 4:00 p.m. If the individual leaves the viewing/betting area for lunch, the individual has two gambling sessions (9:00 to 11:30 a.m. and 12:30 p.m. to 4:00 p.m.).

  6. Question: Does the veterans and surviving spouses' property tax credit have to be added back to income?

    No. The veterans and surviving spouse tax credit is not one of the credits listed in sec. 71.05(6)(a)15, Wis. Stats., that must be added to federal adjusted gross income.

  7. If I have a life estate for my homestead property and I pay the property taxes, may I claim the property taxes on Schedule H?

    Property taxes assessed on property subject to a life estate may only be claimed as "property taxes accrued" for purposes of homestead credit by a person in possession of the life estate interest. The life estate must be in writing and incorporated in the warranty deed or other legal documentation. If the person paying the property tax cannot document the life estate interest, the property taxes paid must be claimed as rent.

    Example: A widow and her son reside in the same home. Prior to the year of the claim, the widow transferred the property to her son by quit claim deed but retained a life estate in the property. She pays the property taxes, but the property tax bill comes in her son's name.

    If otherwise qualified, the widow may file a claim for homestead credit based upon the entire amount of property taxes accrued. The son may not claim homestead credit based upon any portion of the property taxes accrued on the home even though he resides in the property and is otherwise qualified.

  8. Is there a certification requirement before claiming the manufacturing and agriculture credit?

    No. To claim the credit, the claimant must have property in Wisconsin that is assessed as either agricultural or manufacturing and meet other qualifications described in Fact Sheet 1107.

  9. I rent farmland assessed as agriculture property under sec. 70.32(2)(a)4., Wis. Stats., to a person who uses the land to raise crops that he sells. Am I eligible for the manufacturing and agriculture tax credit?

    No. A person who rents land to a farmer to be used in agriculture cannot claim the credit based on the rental income. Only the farmer who rents the land and uses it in agriculture may use the rented land value in computing the credit.

  10. Can I claim the super research and development credit if I have research expenses in the current year but none in the previous three years?

    Yes. If a person does not have research activities prior to 2011, any qualifying expenses in 2011 are an increase in the research activities and may be used to compute the credit.

    For example, assume all provisions for the credit are met. For 2008, 2009, and 2010 qualified expenses are zero and for 2011 expenses are $500. The average of the prior three years is zero (zero + zero + zero)/3 = zero). The credit is calculated as current year expenses less 1.25 x average expenses ($500 - $0). The computed credit is $500.

  11. Are daily deal vouchers like, Groupon or Living Social, unclaimed property for Wisconsin?

    No. A representative from State Treasurer's Office advised DOR on November 15, 2012, that daily deal vouchers are not unclaimed property for Wisconsin. Additional questions can be directed to the State Treasurer's Office, Unclaimed Property Unit at:

    PO Box 2114
    Madison, WI 53701-2114
    Phone: (608) 267-7977

    Claim Request Line (855) 375-2274

    Fax: (608) 261-6799
    Email: OSTUnclaimedProperty@wisconsin.gov

FIDUCIARY INCOME TAX

  1. In the past, I sent Form 2 and Schedule CC by mail and each were processed. If I now use Wisconsin e-File to request the closing certificate electronically and I attach the Form 2 tax return as a PDF document, will the Form 2 be processed with the Schedule CC?

    No. The Form 2 must be filed separately using Wisconsin eFile or sent by mail. When filing electronically, you may attach the federal Form 1041 and schedules.

  2. For estates with less than $50,000 for summary assignments or summary settlements, what attachments are needed to the Form 2 and the Schedule CC?

    Attach the Petition for Summary Settlement or the Petition for Summary Assignment, including any schedules listing property of the decedent. A copy of the will, if there is one, should be included with Schedule CC.

PASS-THROUGH WITHHOLDING TAX

  1. Can a trust without an income tax filing requirement be subject to pass-through withholding for its nonresident beneficiaries? The trust does not own any other tiered entities.

    No. If the trust does not have a filing requirement, it is not required to withhold for its beneficiaries.

INFORMATION RETURNS

  1. I am required to file Form 1099 information returns with the federal Internal Revenue Service. Am I required to send a copy of the Forms 1099 to the Wisconsin Department of Revenue?

    You may be required to send a copy of the federal Form 1099, or Wisconsin Form 9b, to the Department depending upon the type of payment that is being reported on the Form 1099.

    Individuals, fiduciaries, partnerships, limited liability companies, and corporations doing business in Wisconsin and making payments to individuals of rents, royalties, or certain nonwage compensation must file Form 1099 or Form 9b. Payers other than corporations must report rents and royalties only if the payer deducts the payments in computing Wisconsin net income.

    The following payments must be reported on an information return:

    • Rents and royalties of $600 or more paid to a Wisconsin resident, regardless of the location of the property to which such payments relate.
    • Rents and royalties of $600 or more paid to a nonresident on property located in Wisconsin.
    • Annuities, pensions, and other nonwage compensation of $600 or more paid to Wisconsin residents.
      • Nonwage payments of $600 or more made to a nonresident for services performed in Wisconsin.

    If an employee receives wages subject to withholding and additional amounts not subject to withholding, report the total compensation on a wage and tax statement.

    Exception: The requirement to submit Form 1099 to the department for a payment other than rents or royalties is waived if: 1) no Wisconsin income tax is withheld, and 2) Forms 1099 are submitted to the IRS. DOR will receive this information from the IRS.

    For more information on the payments that must be reported to Wisconsin on an information return, see Publication 117, Guide to Wisconsin Information Returns.

  2. What is the due date for filing Form 1099 or 9b information returns with the Wisconsin Department of Revenue?

    The due date for filing information returns with the Department depends on the type of payer (corporate or noncorporate) and the type of payment being reported. The chart below summarizes the due dates for filing information returns with the Department.

    Type of Payment

    Type of Payer

    Due Date

    Rent or royalty

    Noncorporate

    February 28

    Rent or royalty

    Corporation

    March 15

    Nonwage compensation

    All

    February 28

    Note: You are required to furnish the recipient of the payment with a copy of the information return by January 31.

  3. Does the electronic filing requirement for 50 or more wage statements and information returns apply to each employer? Only Wisconsin wage statements and information returns?

    The law provides that if a person is required to file 50 or more wage statements or 50 or more of any type of information return with the Department of Revenue, they must be filed electronically. Therefore, only the number wage statements and information returns with income reportable to Wisconsin are used in determining whether electronic filing is required. If a person filing wage statements and information returns is doing so on behalf of multiple employers and/or payers, the combined number of wage statements and information returns for all employers and payers submitted by the filer is used in determining whether electronic filing is required.

DOR ONLINE APPLICATIONS

  1. When using the online application that allows individuals, practitioners and corporations to verify estimated tax payments available, what will the application display? Will it display extension payments?

    Individuals, corporations, and practitioners may use the Estimated Tax Verification application to determine if an estimated payment using a Form 1-ES or 4-ES payment voucher is available to be applied on a return. Only payments that have not yet been claimed on a processed return will be displayed. If the payment is displayed, the payment is available to be applied to the return.

    In addition to the Form 1-ES and 4-ES payments, the following payments may be accessed: Credit Carry Forwards, Extension Payments, W-200 Payments (Pre-Payment of Tax) and WT-11 Payments (Entertainer Deposit).

  2. Does DOR require the 4th page of Wisconsin Form 1 to print even though no married couple credit or itemized deduction credit is claimed?

    No. DOR has no need for this information in a paper or electronic return. The software company may be making a decision to include or exclude the blank page in a printed document.

  3. If I use Wisconsin e-file to file Form 2 and Schedule CC, can I attach my documentation in multiple files?

    Yes. Wisconsin e-file does allow multiple attachments in a single submission. Information on how to use the Wisconsin e-file attachment feature is available at revenue.wi.gov/wi_efile/attach.html#attach3.

    If you encounter a problem in submitting a return with multiple attachments, please notify Department's Customer Service Bureau using the practitioner email or telephone number previously provided to you so that we can investigate further.

January 3, 2013