Unemployment Compensation from another state

[mblatour]

If a taxpayer lives in State A, and worked in State A in 2006, but also worked in a neighboring state (lives on border) State B, and received unemployment benefits from State B, does the taxpayer have to claim State A & B income on Federal 1040, and then also on BOTH State A & B forms? Or could they claim it solely on State A, the state they live in? There was no federal or state tax withheld from the benefits, so those have to be paid to someone.

It seems to me that it should be State B, but they are filing a State A form for their income earned in that state already; so therefore, would have to file 2 state returns?

I just want to be sure about the reporting part of it.

Hope this makes sense.

[ChEAr$]

unemployment benefits

If a taxpayer lives in State A, and worked in State A in 2006, but also worked in a neighboring state (lives on border) State B, and received unemployment benefits from State B, does the taxpayer have to claim State A & B income on Federal 1040, and then also on BOTH State A & B forms? Or could they claim it solely on State A, the state they live in? There was no federal or state tax withheld from the benefits, so those have to be paid to someone.

It seems to me that it should be State B, but they are filing a State A form for their income earned in that state already; so therefore, would have to file 2 state returns?

I just want to be sure about the reporting part of it.

Hope this makes sense.

No, it really doesn't make sense to anyone who doesn't know what states you';re
talking about, AND whether or not either or both of those states tax unemployment
benefits. Some do; some don't.
Alabama doesn't. Georgia does. Massachussets does. Just to name a few.

you've got to study up on state income tax law in those states in which you have
dealings. Each state has a website for income taxation, which see.

[mblatour]

I've read the books

Thanks for your input. I guess I misunderstood that by not labeling the states, it'd make a big difference. I thought it'd just confuse it more.

The books say to input unemployment compensation from Federal 1040, they DO NOT say anything as to any difference it makes which state paid it.

I thought maybe I'd have to dig deeper and I didn't know where to look. I hoped this board might help. I wish I knew it all, but I'll admit I don't.

[S T]

What States

I have the All States Taxbook,

If you provide the States in question, I will look up for you whether or not the States tax UI.

Sandy

[mblatour]

State A is Minnesota, State B is Wisconsin

On Line 13 for Wisconsin (1-NPR for non-residents) it says for Line 13 Unemployment Compensation, "Non-residents: don't fill in any amount on Line 13".

I just can't help but feel that since WI paid out the unemployment benefits, the tax should somehow be paid to them, not MN, but it DOESN'T say it (not on MN instructions either).

If this is so difficult to find, I can see why there are mistakes made.

"S T" - Thanks, I greatly appreciate it your help!

[Black Bart]

Unemployment

If a taxpayer lives in State A, and worked in State A in 2006, but also worked in a neighboring state (lives on border) State B, and received unemployment benefits from State B, does the taxpayer have to claim State A & B income on Federal 1040, and then also on BOTH State A & B forms? Or could they claim it solely on State A, the state they live in? There was no federal or state tax withheld from the benefits, so those have to be paid to someone.

It seems to me that it should be State B, but they are filing a State A form for their income earned in that state already; so therefore, would have to file 2 state returns?

I just want to be sure about the reporting part of it.

Hope this makes sense.

First, all the unemployment benefits from the various states are taxable on the the federal return, no matter in what or in how many states they were paid from (sorry if I am over-simplifying your question, but I thought that was what you were asking). To read more about this, Google up IRS Publication 525 "Taxable and Nontaxable Income" and scroll to page 26 which gives the update and lowdown on various types of unemployment. Your client should have received a 1099-G from all the states that paid him and they're all taxable to the feds.

Next, I think you're wondering (these kinds of questions are hard to put into words, aren't they?) whether or not you have to file a state tax return in state B (the one where he does not live) if that's the only income he has in that out-of-state state. On that, I suppose you would just check that state, see if they tax unemployment, and if they do and if the amount he received from that state only rises to filing level, then file a return with them, pay it, and take credit for that state tax paid against his home state tax.

It could get a little more complicated if his home state does not tax unemployment, because he will ordinarily be including all states income (but not any unemployment) on the home state tax return and then taking credit for taxes paid to other states. If the home state did not tax unemployment, then they might not want to give him credit for paying tax on something which they are not taxing him on. I guess you would have to call the home state tax department and find out what their policy is on that (would probably have to search intensely for someone who'd know the answer to that one).

Sorry if I've misinterpreted your questions, but that's what it seemed to me you meant. My state (Arkansas) and the other ones I've filed do not tax unemployment at all and so I've never been confronted with your two-state situation before.

Anyhow, this post will take you back to the top and hopefully a knowledgeable soul will happen to read the post. Good luck.

[mblatour]

Minnesota taxes unemployment, but still not positive about WI

On the MN return, you take the amount from your Federal 1040 for Wages, Salaries, Tips, etc, and add on IRA's, Pensions, & Annunities and then Unemployment. That amount is then reduced by standards/itemized and exemptions. Then they add the State Income Tax Addition Amount, and take off credits and other subtractions, then resulting in your MN taxable income.

Therefore the unemployment is taxed in MN. So now he's paying fed tax and state tax on it already. But is the wrong state getting the tax?

What is the correct way to move forward with this? I'm going to call the WI Dept. of Revenue in the morning when they open and I've already e-mailed them.

[S T]

Ui

See Bart's post he has some good points.

UI is taxable to Federal.

Here is what I found in TB All States pg WI 13

WI - PY and NR residents - Unemployment

pro-rate based on the amount of unemployment compensation received while a Wisconsin resident compared to total unemployment compensation received.

key might be "while Wisconsin Resident"

MN- PY and NR residents - Not sure,

This is harder than it appears, so I can see why you are confused.
Seems Wisconsin would pro-rate while a WI resident, however, it also appears as tho MN DOES tax UI. I can not seem to find where MN excludes it as a subtraction on either resident or non-resident.

I tried just a "quickie" on my Tax Software, and WI came up -0-, but MN included UI in taxable.

I think you will need some help from the expert tax pros that reside here on the board , which are the TB people, Brad and Paul, and also another poster Larry M, as they reside in MN and are used to dealing with this!

Wish I could have helped more!

Sandy

[Black Bart]

On the same page?

On the MN return, you...add on...Unemployment...Therefore the unemployment is taxed in MN. So now he's paying fed tax and state tax...But is the wrong state getting the tax?

No. I checked Wisconsin -- they do tax unemployment and if your guy drew enough benefits there, he will have to file a Wisconsin non-resident tax return and pay tax on the Wisconsin unemployment.

Minnesota adds the Wisconsin unemployment to income, but a line on the back of their tax form ("Credit for Income Tax Paid to Another State") subtracts the tax paid to Wisconsin right back off. This way the "right" state gets their money for the unemployment, and he doesn't get taxed again by Minnesota for the same income.

That's the way almost all of the states work it. Each state that has a state tax makes out-of-staters working there file a non-resident tax return and pay them. And each employee's home state makes him include all income from all states on his home-state tax return. But then they give him credit for the tax he paid to the other states so that he is not taxed twice on the same money.

[mblatour]

Black Bart, you're the best!

Thank you so much for the help. I really did read through the document several times, I even read them to my husband and he didn't see a clear answer either. Although we both believed that there has to be a solution leading to WI getting their tax somehow.

When WI said "wages" were taxable, I was looking for the actual word "unemployment", and I should have assumed that unemployment income IS wages. But I guess I was looking for it to be more spelled out. It makes perfect sense to me now with the MN credit paid to another state. I just hate filing WI returns, I guess MN's seem so much more simple to me. I guess I should be glad I get to charge for another state being as his income is high enough from unemployment that he's required to file WI return, but I don't really care about that; I just didn't want to make a mistake.

You really helped me out, kudos to you!

[mblatour]

Looking for Black Bart and Sandy (S T)

Here I am again, bugging on this same old topic! Well, I let the return sit for a day to clear my head (it's for a family member, so it was fine, being as I already e-filed the federal for their refund; so the state is no big rush). I dug some more because when I tried to prepare the return on my ProSeries Software for filing both MN and WI returns together, things weren't adding up right; or making sense. Just like you said Sandy, it kept coming up with ZERO on WI and MN was taxing the UI.

I looked at things with a fresh mind again today and I pulled up Publication 122 (Tax Information for Part-Year Residents and Non-Residents of Wisconsin 2006) and on page 17 (of the Adobe download; page 15 at the bottom of the actual sheet I printed out) it states.

H. Unemployment Compensation and Supplemental Unemployment Benefits

Nonresident of Wisconsin - Unemployment compensation received by an individual who is not a resident of Wisconsin is not taxable by Wisconsin, regardless of whether the payments relate to personal services performed in Wisconsin or another state.

This bit of info. alone was what I was searching for ALL along, but couldn't find in the instruction booklets! I guess one could say it should have been easy enough to find, but for some reason, it wasn't for me! Que Sera!

I sincerely appreciate all the time and effort the 2 of you gave to try assist me with this question. I didn't want to mess this up for him, he's had a rough year already! Now I just wish I could bill out the extra 10 hours I put into this one answer. I already charge very little because he's family. Oh well, a lesson learned is worth every minute of time spent in my opinion.

Thanks again!

[Chief]

States Income

You need a good tax software that includes all states like TaxSlayer Pro or Drake. One low price includes everything. The All States Taxbook is also a good investment. You can't short yourself on reference and research books.

[Black Bart]

Hmmm; guess I

Nonresident of Wisconsin - Unemployment compensation received by an individual who is not a resident of Wisconsin is not taxable by Wisconsin, regardless of whether the payments relate to personal services performed in Wisconsin or another state. [/I]

This bit of info...searching for...should have been easy...it wasn't...wish I could bill out the extra 10 hours I put into this...

should have read further and I also would have learned something (they've got a worksheet for unemployment, but it doesn't apply to non-residents).

The many hours you mention is typical and somehow you just can't seem to get paid enough for NR returns (even if they're not related). All states have their own little peculiarities buried in the fine print and you occasionally have to search high and low to unearth them, so I usually feel underpaid no matter what price I quote for NRs. I've tried to avoid them the last few years, but I've got a good client right now who worked in five different states and I can't get out of it. But...them's the breaks.

Anyhow, I'm glad it worked out. Nice to have you on the board, as we're always in need of new good people. Post again sometime.

[S T]

UI Wi

Mlbatour

Glad you found the info, The All states Edition did have

WI - PY and NR residents - Unemployment Quote: pro-rate based on the amount of unemployment compensation received while a Wisconsin resident compared to total unemployment compensation received.

which eluded to not pertaining to a Non-Resident.

In the Calif we usually don't have to tax the UI on the State return, only the Federal, so this is new for me. And, I also have not had the privilege of preparing a WI or MN return resident or non-resident.

Look forward to seeing more of your posts!

Sandy

[Davc]

Mlbatour

Glad you found the info, The All states Edition did have which eluded to not pertaining to a Non-Resident.

On the West Coast we usually don't have to tax the UI on the State return, only the Federal, so this is new for me. And, I also have not had the privilege of preparing a WI or MN return resident or non-resident.

Look forward to seeing more of your posts!

Sandy

Keep in mind that CA is not all of the west coast.