Taxpayers are both retired Michigan school teachers who moved to Wisconsin in 2023 and receive Michigan pensions. For 2023 all income is taxed by Wisconsin and then Wisconsin gives them credit for the tax they paid to Michigan on this same income (pensions only). Being the 1099-Rs have Michigan distribution amounts in box 16 will they have to file both Michigan and Wisconsin returns in future years? Or can they stop the Michigan withholding, increase their Wisconsin withholding and only file Wisconsin returns in the future? TIA.
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Pensions are taxed in the resident state. When your clients move, have them change their withholding to their new resident state. If they no longer have any MI-sourced income in 2024 and going forward, they won't have to file MI income tax returns. (Although, it sounds as if they'll still have MI withholding for at least 3 months of 2024, so will have to file a 2024 MI NR return to get their withholding back.) -
Are you sure you are handling this correctly? As they are part year residents of both states, the pension should be allocated based on the number of payments received while they were residents of each state. Don't be concerned regarding the box 16 amount. If they didn't notify payee of change of state it won't be correct.Comment
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I agree with kathyc2.
With the facts presented, it seems as if for 2023 they will need to file part-year resident tax returns for **both** states and then make the suitable allocations.
MI should be out of the picture entirely for 2024 and beyond, unless they had MI state tax withheld at the source and then need to file a zero-income MI tax return to recover it.
MI has absolutely NO claim on the retirement funds received by a WI resident.
NOTE: I had a client in a similar situation. The "old state" would only withhold its own state taxes, so it became necessary for the client to start filing estimated tax payments for the NEW state to cover the shortfall.
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