WI help please - Gambling winnings

[BulldogTom]

Client was visiting WI and won a jackpot at a casino for 5K. Client is a CA resident.

Does WI require a tax return for these gambling winnings?

Any help is appreciated.

Tom

Lodi, CA

[mcb39]

I would think they would be taxable to CA. If you live in WI and win in another state, they are taxable to WI.

[Jack from Ohio]

I don't know about WI, but I work about 90 miles from major casinos in IN. No matter where the person lives, IN want's the winnings claimed on an IN return. I fill out Non-Resident IN for gambling winnings 15-20 times a year for Ohio residents.

[GeorgeM]

I lived in MA near 2 casinos in CT, and when I lived in MA and went to them I never had to file a CT return. And also won in a RI State run casino, and did not have to file a RI return.

[mcb39]

OK....I went to the books and got a surprise. "Income of nonresident individuals from winnings from a casino or bingo hall located in Wisconsin and operated by a Native American tribe or ban is taxable by Wisconsin.

Multijurisdictional lottery winnings are taxable by Wisconsin to nonresidents if the winning ticket was purchased from a Wisconsin retailer or the Wisconsin Lottery Board. Income which nonresident individuals receive from the Wisconsin lottery or lottery tickets purchased in Wisconsin have a taxable situs in Wisconsin and are taxable by Wisconsin.

(This surprised me because if a Wisconsin resident has gambling winnings, regardless of where the gambling activity takes place, are taxable to Wisconsin).

[Jack from Ohio]

OK....I went to the books and got a surprise. "Income of nonresident individuals from winnings from a casino or bingo hall located in Wisconsin and operated by a Native American tribe or ban is taxable by Wisconsin.

Multijurisdictional lottery winnings are taxable by Wisconsin to nonresidents if the winning ticket was purchased from a Wisconsin retailer or the Wisconsin Lottery Board. Income which nonresident individuals receive from the Wisconsin lottery or lottery tickets purchased in Wisconsin have a taxable situs in Wisconsin and are taxable by Wisconsin.

(This surprised me because if a Wisconsin resident has gambling winnings, regardless of where the gambling activity takes place, are taxable to Wisconsin).

Looks like WI and IN are running from the same rule book. Out of state gamblers pay tax on gambling winnings in both states!

Gives new meaning to "...keeping profits from the casinos in our state."

[mcb39]

I would hope that CA has a credit for "Taxes Paid to Other States". Even WI has that and we are way up high on the list for the states that pay the most taxes. Doesn't IN have that on the state form?

[Jack from Ohio]

I would hope that CA has a credit for "Taxes Paid to Other States". Even WI has that and we are way up high on the list for the states that pay the most taxes. Doesn't IN have that on the state form?

Not for non-residents. Ohio gives credit for tax paid to other states, but it is not a direct credit.

[joanmcq]

CA has a credit for taxes paid to another state. It just gets wonky with OR & AZ; if the income is in those states, you take the credit on the nonresident return. Wierd!

[BulldogTom]

Taxpayer has no liability in CA. He is retired, SS and a small pension, and this win at the casino are all of his income. CA credit for taxes paid to another state is non-refundable, so he gets no credit for paying the tax in WI.

So I am putting in the WI Non Resident Return, and it says that SS is not taxable to WI, but when it is calculating the tax, it is taking Federal AGI, which includes SS, figuring tax on that amount in WI, and then calculating a percentage of that tax based on the ratio of Federal Income to WI income. How do I get the SS Income removed from the Fed AGI so it is not taxed for WI purposes?

I could really use some help on this.

Tom

Lodi, CA

[mcb39]

Are you using WI Form 1NPR? Line 15 clearly shows SS as not being taxable to WI. The form splits the Fed and the State taxable income. I would also put the SS on line 15 as a negative for Fed. That might solve your problem as there will then be no ratio of Fed to WI. The only income taxable will be the lottery winnings.

[Pacun]

"How do I get the SS Income removed from the Fed AGI so it is not taxed for WI purposes?"

Make a copy of the return or roll over the client again. Prepare a Federal and WI non resident return with ONLY the casino winnings and vuala.

[jainen]

>>How do I get the SS Income removed from the Fed AGI so it is not taxed for WI purposes?<<

Have faith, my friend! Shun those other suggestions that are pure fantasy guesswork.

Read the instructions! The form itself tells you exactly what page to go to on that very question. For Line 35 it clearly says "Note: Even though you may start the tax computation based on federal income, the tax will be later prorated based on the ratio of your Wisconsin income to federal income. The result is that you pay only the portion of the tax attributable to Wisconsin income."

That's different from how we do it in California, where the ratio would be HIGHER because SS is subtracted from the denominator first.

[BulldogTom]

>>How do I get the SS Income removed from the Fed AGI so it is not taxed for WI purposes?<<

Have faith, my friend! Shun those other suggestions that are pure fantasy guesswork.

Read the instructions! The form itself tells you exactly what page to go to on that very question. For Line 35 it clearly says "Note: Even though you may start the tax computation based on federal income, the tax will be later prorated based on the ratio of your Wisconsin income to federal income. The result is that you pay only the portion of the tax attributable to Wisconsin income."

That's different from how we do it in California, where the ratio would be HIGHER because SS is subtracted from the numerator first.

OK, I will give you that I need to read the instructions, and now I will because I did not get the quick answer I was hoping for here.

But I need to take exception to your post my friend. If I am using federal income to calculate the tax, and SS income is included in that amount, and then I apply a percentage factor to the resulting tax, I am still paying tax, even if only a percentage, on SS, which is not taxable income in the state of WI. There has to be a way to pull the SS out.

Let me give you an example. Say I have 17K in taxable SS and 3K in gambling winnings. My income for federal purposes is 20K. My ratio is 15%. My std deduction and exemption is roughly 7,500. My taxable income is now 12,500. Say tax on that is 1,000. My ratio is 15%, so I pay 150 in tax. That is not proper, because the SS is not supposed to be taxable at all, so I only have 3K in WI income, and with my std deduction and exemption, I have 0 taxable income, and therefore 15% of 0 is 0.

Unless WI taxes SS benefits of non-residents, and not the benefits of residents, I need to adjust the SS benefits out of the federal income before the WI tax rate is applied to that income.

Tom

Lodi, CA

[jainen]

>>I need to adjust the SS benefits out of the federal income<<

Yeah, well I think I think you need to follow the instructions so good luck. I'd guess, from the prominent way the form directs you to those instructions, that you are not the first to question the Wisconsin law. And, from the same prominence, I'd guess the state is pretty confident of their interpretation. Moral: if you want to make money the Wisconsin way, you have to pay taxes the Wisconsin way. Or as they used to say, "when in Rome do as the Romans do." http://www.romewi.com/

[BulldogTom]

I think you are correct my friend, there are two standards of taxation in Wisky - one for residents and one for non-residents. I have now read the instructions, and my conclusions were wrong. WI taxes the social security benefits of non-residents. Sucks. But it is what it is.

Tom

Lodi, CA

[mcb39]

Again, I have gone to the book: Taxation: Nonresidents of Wisconsin are taxedon reportable gross income only from Wisconsin sources. See Wisconsin Pub 122: Social Security Benefits are prorated for Part-Year Residents. Social Security Benefits are NOT taxed by Nonresidents. This is a direct quote from the 23rd Edition of the Wisconsin Tax Guide for Tax year 2011, which is exactly one inch thick. There are not two standards of taxation here. Non Residents and Part Year Residents are taxed ONLY on Income Earned in Wisconsin. Jainen is correct in his interpretation.

[BulldogTom]

Marilyn, if that is the case, then how do I get the SS out of the WI non-resident return?

I wish you were right, but when you say that Federal Taxable SS is included in the tax calculation, and then you take a portion of that tax that bears the relationship to WI source income, you are taxing SS benefits. The form does not make an allowance for SS benefits to be removed from the Federal Income before taxes are calculated.

How does the book say to take out the social security from the federal agi?

I really would like to find a way.

Tom

Lodi, cA

[mcb39]

This is the best that I can do for you at this late hour. See page 15 of the instructions for the WI 1NPR. Notice that it says the amount of SS from line 20b. Is all of your client's SS taxable to Fed.11i-152.pdf

[jainen]

>>the best that I can do for you<<

Okay, in spite of my previous position I must now speak up in support of my friend Bulldog Tom, who long ago purchased my everlasting loyalty with two bottles of Mondavi. I know what the Wisconsin instructions SAY, but in my copious free time i have actually been unable to find any combination of numbers under $100,000 by which a non-resident with supposedly non-taxable Social Security would not pay at least a few dollars more tax than a non-resident without such income. Rounded to the nearest fifty or a hundred, it's about the same--but that is a few bottles of Mondavi, you know what I mean?

[BulldogTom]

Marilyn, I was just reading my post and it does not sound very nice to you. I hope you don't think I am being ungrateful for your opinion. I am just tired and frustrated, and I hate it when the government (any government, and I have the worst one out here in CA) tells you something and then does something else. But I am not going to fight the state of WI over this. I was just hoping I was not seeing the solution to get his taxes reduced a little bit.

Thank you for your help. And Jainen, the next time you are coming over to the valley, I will get you another bottle. The cost of shipping is more than the bottle.

Tom

Lodi, CA

[mcb39]

Tom.....I was not trying to be funny by sending you that entire instruction booklet. Am really sorry. I only meant to send pages one through sixteen, but it was late and I was tired and Adobe got away on me. Living and working here, I rarely file a 1NPR for a non-resident and pretty seldom for part year residents. Did you try putting the SS on line 30 in the Federal column?

[mcb39]

And now in rereading your original post, how is the SS taxable to Fed if all the income he has is SS and a small pension? I think that is the entire point of taking the Federal amount on line 20b of the Federal return, which should be zero as his SS should not be taxable there either. Seems as though we are all missing something here. I understand your frustration here as I cannot stand leaving anything unanswered.

[BulldogTom]

Don't know if this is proper or not, but I found this nice little for called a WI Sch. I. It is for adjusting Federal AGI and Itemized Deductions to WI amounts. And seeing how the instructions say that SS is not taxed, I just adjusted his Federal AGI on that schedule.

A funny thing happed, which Jainen will thoroughly enjoy. The taxes did not go down that much, because the denominator of the ratio fell, the ratio increased. So even though I found a (questionable) way to reduce his income, those dirty dogs still got a chunk of his good fortune.

Tom

Lodi, CA

[jainen]

>>those dirty dogs still got a chunk<<

The same chunk your own state would exact from an out-of-state taxpayer, Tom.