I am a resident of Wisconsin working in Minnesota. How does the lack of a reciprocity agreement affect me?
Your Minnesota employer will withhold Minnesota income taxes from personal service income, such as salaries, wages, commissions and fees.
Your Minnesota employer will use the federal Form W-4 or the Minnesota W-4MN to determine the amount of Minnesota income tax to be withheld from your wages. Contact your Minnesota employer if you have questions about Form W-4 or Form W-4MN.
Will my employer withhold Wisconsin tax from my wages?
No, Wisconsin income taxes will not be withheld from that income. There is a special withholding arrangement authorized by the Secretary of Revenue.
Wisconsin residents working in Minnesota are subject to withholding of Minnesota income tax from their wages. However, if the employer also does business in Wisconsin (has nexus in Wisconsin), under Wisconsin law the employer would ordinarily be required to withhold Wisconsin income tax from the same wages that are subject to the Minnesota withholding.
Based on contacts with employers and employees, this causes a hardship for those employees who have both Minnesota and Wisconsin income tax withheld. To alleviate this problem and pursuant to sec. 71.64(7), Wis. Stats., the Secretary authorized a special withholding arrangement in which Wisconsin withholding will not be required under the following circumstances:
- The employee is a legal resident of Wisconsin (i.e., domiciled in Wisconsin) when the wages are earned in Minnesota, and
- The same wages earned by the Wisconsin resident and subject to the withholding of Minnesota income tax would also be subject to the withholding of Wisconsin income tax.
Note: Employees who do not have Wisconsin income tax withheld from the wages earned in Minnesota will be required to make regular estimated tax payments if they expect to owe $500 or more with their Wisconsin income tax return for the year. Employers may want to inform their employees of this requirement.
Will I need to make Wisconsin estimated tax payments?
Every situation is different, but generally the credit for income tax paid to Minnesota will offset the Wisconsin income tax on the Minnesota wages, so estimated tax payments will not be required. However, if you have income not subject to withholding, such as interest, dividends, capital gains, unemployment compensation, etc., you may need to make
estimated tax payments.
What do I need to do?
- File a Minnesota income tax return as a nonresident. All personal service income earned in Minnesota will be reported to Minnesota.
- File a Wisconsin income tax return (Form 1). You will report all income received, including wages earned in Minnesota, on your Wisconsin return. Wisconsin will allow a credit for the net income tax paid to Minnesota on income that is taxed by both Wisconsin and Minnesota.
Questions?
If you have questions about Wisconsin income tax, contact the Wisconsin Department of Revenue:
If you have questions about Minnesota income tax, contact the Minnesota Department of Revenue:
I am a Minnesota employer that employs Wisconsin residents. How does the lack of a reciprocity agreement affect me?
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Minnesota Withholding – You must withhold Minnesota income taxes on the wages of Wisconsin residents working in Minnesota. Use Minnesota Form W-4MN to determine the amount of Minnesota income tax to be withheld from your employees' wages.
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Wisconsin Withholding – Employers are not required to withhold Wisconsin income tax from wages of Wisconsin residents employed in Minnesota. The Secretary of Revenue has authorized a
special withholding arrangement for employers of Wisconsin residents working in Minnesota.
Note: Minnesota employers who no longer have a withholding obligation for Wisconsin should inactivate their Wisconsin withholding tax account.
Questions?
If you have questions about Wisconsin withholding tax, contact the Wisconsin Department of Revenue:
Applicable Laws and Rules
This document provides statements or interpretations of the following laws and regulations enacted as of January 29, 2025: secs. 71.03, 71.04, 71.07, 71.09, 71.10 and 71.64,
Wis. Stats., and secs. Tax 2.02 and 2.90,
Wis. Adm. Code.
Laws enacted and in effect after this date, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to this date, that is contrary to the information in this document is superseded by this document, according to sec. 73.16(2)(a), Wis. Stats.