Worked in MN & lived in WI. Employer is reporting all of my wages for WI & taking state income tax out for WI because I had a WI address. Can they do this?

[volleyballgirl96]

Employer states that having a WI address automatically puts me with a WI location even though I never worked in WI for them. They want me to report my entire wages for WI, part for MN and part for AR (after I moved). This is really messing up my return since it's saying I made double of what my wages are and hardly paid anything in WI state income tax (which they started taking out after I moved to ARK). I don't know how to file now because of this.

[DanielV01]

What was your living and work situation last year?  Did you live in WI all year or part of it.  If a part-year, from when until when did you live there?  Your situation has detail to it, but I can assist you if you can help me understand a little better.

[volleyballgirl96]

I lived in WI for part of the year and worked in MN, then moved to AR in August and worked there. Nobody finished my change of address to the employer so they have me living in WI the whole year. They're stating that all of the wages I made in MN and AR are taxable in WI and when filing taxes for each state (3 in total) that I have to put everything they put in the W-2s, which puts me at making double of what I actually made in 2018. They say this is correct. I'm not sure how to enter this information into my returns without having to owe on income I never made. I contacted the MN Department of Revenue - they said my employer needs to file me a corrected W-2 with the income split differently for MN and WI so all 3 states equal my gross income for the year, but my employer refuses saying that they're correct, I just have to talk to an accountant to enter it.

[DanielV01]

You can fix this in TurboTax, but I need to know if your MN income reflects what you made there or does it also report the entire year?

[volleyballgirl96]

My MN income reflects what I made in MN accurately.

[DanielV01 · Accepted solution]

Here's what to do:

1.  Prepare your Minnesota nonresident return first.  Since Wisconsin does tax that income for sure, you will want to prepare that return first so that Wisconsin will credit you for the tax you pay to MN on that income.

2.  Prepare a Wisconsin part-year resident return.  Your employer cannot change the W2 because they withheld taxes to Wisconsin on the full amount (even though they probably should not have).  But this will get fixed as part of the return.  In the Wisconsin interview, you will be asked a series of questions related to your move to Arkansas you will have to answer.  This is so Wisconsin will treat your residency as part-year and not full-year.  (Comment back if you must be treated as a full-year WI resident).

After you answer these questions, you will see a screen on how Wisconsin treats income and credits.  If you have nothing to enter there, select Continue.  You will then see a screen stating Wisconsin Salary Allocation.  You will see a Federal Total and a Wisconsin Total.  The box in Wisconsin Total is likely reporting all of the income.  Override the entry and enter the income reported to Minnesota.  This is the correct amount of income you earned in Wisconsin.  Follow through the rest of the screens to make sure that you receive the credit for taxes paid to Minnesota.  

Since you probably paid more in to Wisconsin than necessary (WI tax withheld from all income), you will be refunded the excess withheld.

3.  Prepare the Arkansas part-year return.  You should see a similar screen in the return to designate the amount of AR income.  If your W-2 has this information reported already, you will not go further.  If not reported, your AR income is total income minus Minnesota income.  No credit is needed to be calculated on your AR return, because you were living and working in AR during that period.