Ensuring Reciprocal Agreements Are Properly Activated for States

Forum|Forum|3 years ago
April 5, 2023
1 reply
24 views

Taxpayer files MFJ.

The spouse mistakenly withheld taxes to Wisconsin, and they reside in Illinois.

IL and WI have a reciprocal agreement.

Based on my understanding, there is a way to make this only an Illinois state return, or at least ensure the reciprocal agreement is being recognized in ProSeries.

How do I do so?

https://tax.illinois.gov/questionsandanswers/12.html#:~:text=agreement%20with%20Illinois%3F-,What%20if%20I%20live%20or%20work%20in%20a%20state,a%20reciprocal%20agreement%20with%20Illinois%3F&text=If%20you%20are%20an%20Illinois,an%20employer%20in%20these%20states.

ProSeries Professional

This topic has been closed for replies.

sjrcpa

Level 15

He has to file a WI nonresident return to get a refund of the tax withheld.

Meanwhile they may owe IL.

The software should recognize the reciprocity. (Lacerte does anyway)

The more I know the more I don’t know.

T

tccpg289

Level 5

So basically -

No income allocated to WI, all income allocated to IL

Refund of withholding to WI.

Let's pretend that the income was indeed earned in WI and it wasn't an error - how would the software handle the reciprocity? I was always under the impression that reciprocity meant the non-resident return did not need to be filed.

sjrcpa

Level 15

Reciprocity means the wages are only taxable in the resident state. No Wisconsin return is required. But your client might like to have the Wisconsin tax withheld refunded. Filing the nonresident return to get the refund is optional.

The more I know the more I don’t know.

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