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kingcl2
Level 2

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

As an AR resident I receive non wage income from both AR and WI.  Pension incomes and rental property income all come from WI. However, AR receives taxes from one Pension income and WI receives taxes from another retirement account.  WI rental property income is not taxed until I file year end taxes. Farm land income comes from AR and is also not taxed until I file year end taxes. How do I avoid double taxes? Since Federal form only asks for total IRA, pensions, and annuities, regardless of which state withheld taxes, what lines on Federal Forms do I need to look at and also WI and AR State forms to ensure I'm getting the appropriate tax credits. [email address removed]

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DavidD66
Employee Tax Expert

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

First of all, what state tax is withheld does not determine in which state that income is taxable.  If you are a full time resident of Arizona, all of your retirement income is Arizona income, taxable by them and not taxable by Wisconsin.  As an Arizona resident, all of your income is taxable by Arizona, regardless of where you earned it.  So, the income from your rental in Wisconsin is taxable by Arizona.  As a Wisonsin non-resident, your income earned there is taxable by them.  In order to prevent double taxation, your resident state of Arizona will issue you a credit for tax paid to other states.  To enter this in TurboTax correctly, you should prepare your non-resident Wisconsin return first, and then complete your Arizona return.  There will be pages in your Wisconsin return where you allocate your income.  Only allocate income earned in Wisconsin to Wisconsin, and that does not include pension income.

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9 Replies
DavidD66
Employee Tax Expert

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

First of all, what state tax is withheld does not determine in which state that income is taxable.  If you are a full time resident of Arizona, all of your retirement income is Arizona income, taxable by them and not taxable by Wisconsin.  As an Arizona resident, all of your income is taxable by Arizona, regardless of where you earned it.  So, the income from your rental in Wisconsin is taxable by Arizona.  As a Wisonsin non-resident, your income earned there is taxable by them.  In order to prevent double taxation, your resident state of Arizona will issue you a credit for tax paid to other states.  To enter this in TurboTax correctly, you should prepare your non-resident Wisconsin return first, and then complete your Arizona return.  There will be pages in your Wisconsin return where you allocate your income.  Only allocate income earned in Wisconsin to Wisconsin, and that does not include pension income.

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kingcl2
Level 2

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

So, since my primary residence is Arkansas (not Arizona) for all of 2019, and my pension income and rental property income all come from Wisconsin, it is all only by Arkansas? What IRS Tax Publication could I reference regarding this situation?  How do I handle a refund I received from Wisconsin as a part year resident in 2018? Would that also be included and taxed by Arkansas for the 2019 tax year? 

kingcl2
Level 2

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

My "income earned" is pension/retirement benefits received from my past employers. Are you saying that income is taxed by Wisconsin, even if I didn't earn any monies in Wisconsin (from a current employer only pension benefits)? I'm trying to determine if I even need to complete a Wisconsin return. I receive two pensions from previous employers in Wisconsin one of them is able to take out Arkansas taxes the other says they are only able to take out Wisconsin taxes. How do I ensure that the pension that takes out Wisconsin taxes is applies to Arkansas? Do I really need to file two state taxes?

DaveF1006
Employee Tax Expert

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

Yes, you will need to file two state returns.  File your Wisconsin state non-resident return first so that you will receive the tax credit from Wisconsin to be applied to your Arkansas.return.

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kingcl2
Level 2

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

Okay, how do I start the State returns over since I originally started with Arkansas? 

kingcl2
Level 2

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

Your original response indicated that I would NOT have to file Non Residence income taxes since I was not employed by an employer for all of 2019.  My income is only pension/retirement income and rental property income from properties owned in Wisconsin and a WI refund received from 2018 filed taxes. 

ThomasM125
Employee Tax Expert

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

You can delete the Arkansas return to start it over. You will see an option to do this when you go to work on your state return if you are working online with TurboTax. If you have the desktop version of TurboTax, you will see an option to "remove state return" in the "File" menu when you are in the federal section of TurboTax.

 

It is recommended that you prepare the non-resident state first in TurboTax, but you can also continue with what you are doing if you want, as long as you make sure you enter the Wisconsin tax amount correctly when requested in your Arkansas program.

 

Since you have rental income from Wisconsin, you would need to file a tax return there. 

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kingcl2
Level 2

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

Thank you, I was able to delete Arkansas and redo it.  However, at the review portion I'm being asked on the  Arkansas Residence Only, "Out-of State Tax Credit Worksheet" Line C - Amount of withholding from the other State. Where do I find that figure? It it the withholding amount from the Wisconsin W-2s or does it come from the Federal or Wisconsin State Return?  If so, what line on the return to I find that figure? 

AmyC
Employee Tax Expert

Residence is in AR; earned non wage income earned in AR and WI how do I ensure I don't get taxed twice on WI income

When asked for withholding, it really means all money paid to the state. Taxes withheld and estimates paid. In your case, add W2 tax withheld for WI.

 

@kingcl2

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