Should my unemployment income/return from Indiana decrease my state return for Wisconsin (I have multi-state return and when I entered IN 1099G my WI return decreased )?

[matt-sally]

I did not expect my Wisconsin return to decrease based on an Indiana 1099-G for unemployment, yet it decreased Wisconsin return by nearly 1/3. Any thoughts on if this is accurate?

[AmyC]

If you are a full year resident of WI, then all income goes on WI and you receive a credit for the IN tax liability on the same income.

In order for the program to work correctly, prepare the state returns in the same order that you lived in the states. Prepare non- resident returns first.

For example: Gambling in Indiana and live in WI. Then do IN first, then WI

Example 2: Lived in WI then moved to IN. Do WI part year then IN part year.

[matt-sally]

Thanks. I did that and it still didn't work. It didn't give me a refund for Indiana but also didn't credit my Wisconsin taxes. I even talked to someone at Turbo Tax and they were surprised/confused as well. 

[MaryK4]

You do not have to file an Indiana state tax return because of the reciprocity agreement between Wisconsin and Indiana.

"You may not claim a credit for tax paid to another state on income which is subject to a reciprocity agreement. For 2019, Wisconsin has reciprocity agreements with Illinois, Indiana, Kentucky, and Michigan.Under the reciprocity agreements, these four states generally will not tax certain earned income (for example, wages, salaries, tips, etc.) earned in these states by Wisconsin residents, and Wisconsin will not tax the earned income earned in Wisconsin by residents of those states."  Credit for Tax Paid to Another State

@matt-sally

[matt-sally]

@MaryK4 , makes sense. However, Indiana did tax this unemployment income, despite us living in Wisconsin for the full year. And I have the 10-99 that shows that. So what should I do in that situation?

[KrisD15]

The employer has the right to choose the state that supplies the unemployment insurance. 

Since you are dealing with reciprocal states, your income does not get taxed by the state you work in, but that does not cover unemployment payments. 

You should file a non-resident state tax return for Indiana and claim the unemployment compensation you received. 

When to file non-resident state tax