Wisconsin's taxation of wages for both resident and nonresident remote employees is governed by specific regulations that outline the employer's withholding obligations and the sourcing of wages. Below is a summary of key aspects:
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Employer Withholding Obligations: Employers are required to withhold Wisconsin income tax from the wages of their employees, including those earned by nonresident employees for work performed in the state. The withholding amount is determined according to withholding tables prepared by the Department of Revenue (DOR) [2].
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Sourcing of Nonresident Wages: Nonresident employees' wages are sourced to Wisconsin based on the performance of services within the state. If a nonresident employee is working in Wisconsin but also performs work outside the state, only the income derived from Wisconsin services is subject to withholding [2].
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Reciprocity Agreements: Wisconsin has reciprocity agreements with Illinois, Indiana, Kentucky, and Michigan. This means that non residents from these states are not subject to Wisconsin withholding on their wages earned in Wisconsin, provided they also have an income tax obligation in their home state [6].
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De-minimis Thresholds: Employers are not required to withhold Wisconsin income tax on the wages of nonresident employees who are expected to earn less than $2,000 in the calendar year from services performed in Wisconsin [2]. If it becomes evident that a nonresident employee will earn more than $2,000, the employer must begin withholding from future earnings.
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Local/City Wage Taxes: Wisconsin's laws do not impose local or city wage taxes that affect income employees, simplifying the tax landscape for employers and employees within the state [6].
In summary, Wisconsin imposes clear guidelines on how wages are taxed for both residents and nonresidents, along with specific exemptions and agreements designed to facilitate tax compliance.