Tax 2.85 Note 2) Since Mr. Smith does not provide the records requested regarding his business, which primarily receives payments in cash, to support the reported gross receipts by the date specified in a summons request for records, the department issues a notice of assessment to Mr. Smith including an estimated amount into income for unreported receipts, which represents the penalty provided in s. 71.80 (9m) (a) 1., Stats. Additional tax of $60,000, a negligence penalty of $15,000 and the penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $15,000 results in the assessment from including these estimated receipts. Mr. Smith appeals the assessment, provides the records that were requested during the audit, and explains that he forgot to provide the records that were previously requested. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person's control. However, the records provided show that unreported receipts were only 20% of the amount previously included by the department as estimated unreported receipts. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 71.80 (9m) (a) 2., Stats., is reduced from $15,000 to $3,000.
Tax 2.85 Note 3) Assume the same facts as Example 2, except that Mr. Smith explains that he did not previously provide the requested records because his accountant had possession of them and was in the hospital when the records were requested during the audit. In this situation the failure to provide the records requested is reasonable or justified by factors beyond the person's control. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $15,000 is waived.
Tax 2.85 History History: EmR0929: emerg. cr. eff. 10-19-09; CR 09-087: cr. Register June 2010 No. 654, eff. 7-1-10; correction in (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register June 2010 No. 654; CR 17-018: cr. (2) (cm), am. (3) (intro.), cr. (3) (c), am. (3) (c) (Examples), (4) (b) (Examples) Register September 2019 No. 765, eff. 10-1-19; correction in (4) (b) (Examples) made under s. 13.92 (4) (b) 7., Stats., Register September 2019 No. 765.
Tax 2.87 Tax 2.87 Reduction of delinquent interest rate under s. 71.82 (2) (b), Stats.
Tax 2.87(1)(1)Procedures. The secretary may reduce the delinquent interest rate from 18% to 12% per year when the secretary determines the reduction fair and equitable, if the person from whom delinquent taxes are owing:
Tax 2.87(1)(a) (a) Requests the reduction in writing, addressed to the Wisconsin Department of Revenue, Compliance Bureau, P.O. Box 8901, Madison, WI 53708.
Tax 2.87(1)(b) (b) Clearly indicates why it is fair and equitable for the rate of interest to be reduced. Information regarding one or more of the factors under sub. (2) may be indicated.
Tax 2.87(1)(c) (c) Is current in all return and report filings and tax payments for all matters other than the delinquencies for which interest reduction is being sought.
Tax 2.87(1)(d) (d) Pays the taxes, reduced amount of interest and any penalties associated with them within 30 days of receiving notice from the department of the reduction.
Tax 2.87(1)(e) (e) For combined group members, the designated agent is charged with this responsibility.
Tax 2.87 Note Note: See s. Tax 2.65 for rules relating to the designated agent.
Tax 2.87(2) (2) Factors for secretary's consideration. In determining whether an interest rate reduction is fair and equitable, the secretary may consider the following factors:
Tax 2.87(2)(a) (a) The taxpayer's prior record of reporting and payment to the department.
Tax 2.87(2)(b) (b) The taxpayer's financial condition.
Tax 2.87(2)(c) (c) Any circumstances which may have prevented payment such as death, imprisonment, hospitalization or other institutionalization.
Tax 2.87(2)(d) (d) Any unusual circumstances which may have caused the taxpayer to incur the delinquency or prevent its payment.
Tax 2.87(2)(e) (e) Any other factor which the secretary believes pertinent.
Tax 2.87(3) (3) Determination not appealable. The secretary's determination under this rule is not appealable.
Tax 2.87 Note Note: Section Tax 2.87 interprets ss. 71.255 (7) (b) and 71.82 (2) (b), Stats.
Tax 2.87 History History: Cr. Register, February, 1979, No. 278, eff. 3-1-79; am. (1) (intro.), Register, September, 1983, No. 333, eff. 10-1-83; CR 10-095: cr. (1) (e) Register November 2010 No. 659, eff. 12-1-10; CR 19-141: am. (1) (a) Register September 2020 No. 777, eff. 10-1-20.
Tax 2.88 Tax 2.88 Interest rates.
Tax 2.88(1)(1)Interest on unpaid taxes which are not delinquent. Unpaid individual income or corporate franchise or income taxes which are not delinquent but which are assessed by the department on or after August 1, 1981 shall bear interest computed at the rate of 12% per year from the due date of the taxes to the date paid or delinquent.
Tax 2.88(2) (2) Interest on delinquent taxes. Any individual income or corporate franchise or income tax delinquencies shall include interest at the rate of 1.5% per month from the date on which the taxes became delinquent until the taxes are paid.
Tax 2.88(3) (3) Interest on refunds.
Tax 2.88(3)(a)(a) Any refund of individual income or corporate franchise or income taxes shall include interest at the rate of 3% per year from the due date of the return to the date paid by the department, except as provided in pars. (b), (c), and (d).
Tax 2.88(3)(b) (b) No interest may be allowed on income and franchise taxes if the refund is certified on a refund roll within 90 days of the due date of the return or the date the return was filed, whichever occurs later. This treatment shall apply to a refund of taxes resulting from an overpayment of estimated tax as well as from withheld taxes.
Tax 2.88(3)(c) (c) No interest may be allowed on a refund of income taxes that results from the carryback of a net operating loss.
Tax 2.88(3)(d) (d) No interest may be allowed on refunds due to a tax credit issued under ss. 71.07 (3q), (3w), (3wm), and (3y), 71.28 (3q), (3w), (3wm), and (3y), and 71.47 (3q), (3w), and (3y), Stats., and subch. VIII of ch. 71, Stats.
Tax 2.88(4) (4) Interest on deposit of contested taxes. Any refund of an amount deposited with the department pursuant to s. 71.90 (1), Stats., shall include interest at the rate of 3% per year from the date the funds were deposited to the date refunded.
Tax 2.88(5) (5) Extension periods. If an extension of time is granted for filing an individual income or a corporate franchise or income tax return, any taxes owing with the return are subject to interest during the extension period at the rate of 12% per year. However, if the return is not filed or the taxpayer files but fails to pay the tax by the end of the extension period, the taxes owing become delinquent and shall be subject to delinquent interest under sub. (2) from the end of the extension period until paid.
Tax 2.88 Note Note: 2013 Wis. Act 20 reduced the rate of interest on refunds of taxes and refunds of the deposit of contested taxes from 9% to 3%. The 3% rate applies to refunds paid on or after July 2, 2013, regardless of the taxable periods to which the refunds pertain.
Tax 2.88 Note Note: Any individual income or corporate franchise or income taxes which were delinquent before November 1, 1975 were subject to delinquent interest at the rate of 1% per month from the date the tax became delinquent to October 31, 1975 and at 1.5% per month from November 1, 1975 until paid.
Tax 2.88 Note Note: For any tax refunded from a return which had a filing due date prior to November 1, 1975, interest was computed at the rate of 6% per year from the due date of the return to October 31, 1975, and at the rate of 9% per year from November 1, 1975 to the date paid by the department.
Tax 2.88 Note Note: Section Tax 2.88 interprets ss. 71.03 (7), 71.07 (3q), (3w), (3wm), and (3y), 71.24 (7), 71.28 (3q), (3w), (3wm), and (3y), 71.44 (3), 71.47 (3q), (3w), and (3y), 71.55 (4), 71.82 (1) and (2) (a), and 71.90 (1), Stats.
Tax 2.88 History History: Cr. Register, January, 1979, No. 277, eff. 2-1-79; r. and recr. (1), (3) and (4), Register, September, 1983, No. 333, eff. 10-1-83; renum. (2) to (4) to be (3), (2) and (5) and am., cr. (4), Register, July, 1989, No. 403, eff. 8-1-89; CR 14-005: am. (3) (a), (4) Register August 2014 No. 704, eff. 9-1-14; CR 16-046: am. (3) (a), cr. (3) (c) Register January 2018 No. 745, eff. 2-1-18; CR 19-141: am. (3) (a), cr. (3) (d) Register September 2020 No. 777, eff. 10-1-20; correction in (3) (d) made under s. 35.17, Stats., Register September 2020 No. 777.
Tax 2.89 Tax 2.89 Estimated tax requirements for short taxable years.
Tax 2.89(1)(1)General. Under ss. 71.09 and 71.29, Stats., certain corporations and persons other than corporations shall make estimated tax payments. For short taxable years, estimated tax payments shall be made in accordance with this section.
Tax 2.89 Note Note: For taxable years beginning on or after January 1, 1994, and ending before April 1, 1999, estimated tax includes the temporary recycling surcharge under s. 77.93, Stats.
Tax 2.89(2) (2) Definitions. In this section:
Tax 2.89(2)(a) (a) “Corporation" includes corporations, tax-option (S) corporations, insurance companies, publicly traded partnerships treated as corporations in section 7704 of the Internal Revenue Code, limited liability companies treated as corporations under the Internal Revenue Code, joint stock companies, associations, common law trusts, regulated investment companies, real estate investment trusts, real estate mortgage investment conduits, nuclear decommissioning trust funds and virtually exempt entities as defined in s. 71.29 (1) (c), Stats.
Tax 2.89(2)(b) (b) “Estimated tax payable" means the amount calculated under s. 71.09 (13) or 71.29 (9) or (10), Stats.
Tax 2.89(2)(c) (c) “Persons other than corporations" includes individuals, estates, trusts other than those treated as corporations in par. (a), partnerships except publicly traded partnerships treated as corporations in section 7704 of the Internal Revenue Code and limited liability companies treated as partnerships under the Internal Revenue Code.
Tax 2.89(2)(d) (d) “Short taxable year" means a period of less than 12 months.
Tax 2.89(3) (3) Number of installment payments required.
Tax 2.89(3)(a) (a) For short taxable years, the following number of estimated tax installment payments shall be made:
Tax 2.89(3)(a)1. 1. For periods of one month or less, none.
Tax 2.89(3)(a)2. 2. For periods of 2 to 3 months, one.
Tax 2.89(3)(a)3. 3. For periods of 4 to 6 months, 2.
Tax 2.89(3)(a)4. 4. For periods of 7 to 9 months, 3.
Tax 2.89(3)(a)5. 5. For periods of 10 to 11 months, 4.
Tax 2.89(3)(b) (b) Except as provided in par. (c), for purposes of determining the required number of estimated tax installment payments under par. (a), a portion of a month shall be treated as a full month.
Tax 2.89(3)(c) (c) If a short taxable year terminates before the end of a month and another taxable year begins at that time, for estimated tax installment purposes the first taxable period shall be treated as ending on the last day of that month and the second taxable period shall be treated as beginning on the first day of the following month.
Tax 2.89 Note Note: Refer to the examples of the estimated tax payment requirements for short taxable years involving a portion of a month that follow sub. (7) (b) 4.
Tax 2.89(4) (4) Due dates of installment payments for corporations. For short taxable years, corporations, or the designated agent as provided in s. Tax 2.65 (3) (a) 5., shall make estimated tax installment payments on or before the 15th day of each of the following months:
Tax 2.89(4)(a) (a) For periods of 2 to 3 months, the last month of the taxable year.
Tax 2.89(4)(b) (b) For periods of 4 to 6 months, the 4th and last months of the taxable year.
Tax 2.89(4)(c) (c) For periods of 7 to 9 months, the 4th, 6th and last months of the taxable year.
Tax 2.89(4)(d) (d) For periods of 10 to 11 months, the 4th, 6th, 9th and last months of the taxable year.
Tax 2.89(5) (5) Due dates of installment payments for persons other than corporations.
Tax 2.89(5)(a) (a) Except as provided in pars. (b) and (c), for short taxable years, persons other than corporations shall make estimated tax installment payments on or before the 15th day of each of the following months:
Tax 2.89(5)(a)1. 1. For periods of 2 to 3 months, the first month following the close of the taxable year.
Tax 2.89(5)(a)2. 2. For periods of 4 to 6 months, the 4th month of the taxable year and the first month following the close of the taxable year.
Tax 2.89(5)(a)3. 3. For periods of 7 to 9 months, the 4th and 6th months of the taxable year and the first month following the close of the taxable year.
Tax 2.89(5)(a)4. 4. For periods of 10 to 11 months, the 4th, 6th and 9th months of the taxable year and the first month following the close of the taxable year.
Tax 2.89(5)(b) (b) If a person other than a corporation files an income tax return on or before the last day of the first month following the close of the taxable year and pays the full amount computed on that return as payable, that person need not make the last payment of estimated tax.
Tax 2.89(5)(c) (c) Instead of making estimated tax installment payments, a farmer or fisher as defined in s. 71.09 (1) (a), Stats., may either pay the estimated tax in full by the 15th day of the first month after the close of the taxable year or file the tax return on or before the first day of the 3rd month following the close of the taxable year and pay the full amount computed on that return as payable.
Tax 2.89(6) (6) Computation of estimated tax payable. Corporations and persons other than corporations shall make estimated tax payments equal to the lesser of the following amounts:
Tax 2.89(6)(a) (a) Ninety percent of the tax shown on the return for the taxable year or, if no return is filed, 90% of the tax for the taxable year.
Tax 2.89(6)(b) (b) For individuals, corporations having less than $250,000 of Wisconsin net income and estates and trusts having less than $20,000 of Wisconsin taxable income for the current taxable year, the tax shown on the return for the preceding taxable year, provided the taxpayer filed a return for the preceding year covering a full 12-month year. When the current year is a short taxable year and the preceding year was a period of 12 months, the tax shown on the return for the preceding taxable year may be prorated based on the number of months in the short taxable year.
Tax 2.89 Note Example: Corporation A receives federal approval to change its taxable year from a calendar year to a fiscal year ending on June 30. To make the change, Corporation A files a franchise or income tax return for the period beginning January 1 and ending June 30. On this short-period return, it reports net tax of $8,000. Corporation A's Wisconsin net income for the current taxable year is less than $250,000. Therefore, its estimated tax payable is the lesser of 90% of the tax shown on its current year return or 100% of the tax shown on its prior year return, provided it had filed a tax return for that year covering a 12-month period. The tax shown on Corporation A's return for the preceding taxable year, a 12-month period, was $6,000. Corporation A's estimated tax payable for the current taxable year is $3,000, $6,000 prior year's tax x 6 months/12 months.
Tax 2.89 Note Note: Corporations having Wisconsin net income of $250,000 or more for the current taxable year and estates or trusts having Wisconsin taxable income of $20,000 or more for the current taxable year may not calculate their estimated tax payable under par. (b).
Tax 2.89(6)(c) (c) Ninety percent of the tax calculated by annualizing the taxable income earned for the months in the taxable year ending before the due date of the installment. The following special rules apply:
Tax 2.89(6)(c)1. 1. Corporations which determine their Wisconsin net incomes under the apportionment method may compute their annualized income using the apportionment percentage from the return filed for the previous taxable year if the previous year's return is filed by the due date of the installment for which the income is being annualized and the apportionment percentage on that return is greater than zero. A corporation that has at least $250,000 of Wisconsin net income for the current taxable year may also compute annualized income using the apportionment percentage from the return filed for the previous taxable year if the previous year's return is filed by the due date of the 3rd installment, the apportionment percentage on that return is greater than zero, and the apportionment percentage used in computing the first 2 installments is not less than the apportionment percentage used on that return.
Tax 2.89(6)(c)2. 2. Entities subject to tax on unrelated business taxable income and trusts and estates shall annualize their incomes for the months in the taxable year ending one month before the installment due date.
Tax 2.89(7) (7) Portion of estimated tax payable in each installment. The portion of the estimated tax payable in each installment depends on when the taxpayer determines that the taxable year will be a period of less than 12 months and the number of installment payments required, as follows:
Tax 2.89(7)(a) (a) If an event that will terminate the taxable year before the end of the 12th month occurs after the taxpayer has begun making estimated tax payments, the initial estimated tax installment payments shall be based on 25% of the estimated tax payable, with the last payment adjusted for the difference between the estimated tax liability and the amount previously paid.
Tax 2.89 Note Examples: 1) Corporation B, which has been filing tax returns on a calendar-year basis, receives federal approval to change its taxable year to a fiscal year ending on July 31. To make the change, Corporation B files a franchise or income tax return for the short taxable year beginning January 1 and ending July 31. Since this is a period of 7 months, Corporation B must make 3 estimated tax payments. Twenty-five percent of the estimated tax shall be paid for each of the installments due March 15 and June 15. The balance of the estimated tax shall be paid on or before July 15. If Corporation B's estimated tax payable is $80,000, Corporation B must pay $20,000, 25% x $80,000 estimated tax payable, for each of the installments due March 15 and June 15 and $40,000, 50% x $80,000 estimated tax payable, for the installment due July 15.
Tax 2.89 Note 2) Corporation C, a calendar-year filer, merges into Corporation D on October 6. As a result, Corporation C files its final franchise or income tax return for the short taxable year beginning January 1 and ending October 6. Corporation C must make 4 estimated tax payments, each for 25% of the estimated tax payable. The installments must be paid on or before March 15, June 15, September 15 and October 15. If Corporation C's estimated tax payable is $100,000, Corporation C must pay $25,000, 25% x $100,000 estimated tax payable, for each installment.
Tax 2.89(7)(b) (b) If an event that will result in a taxable year of less than 12 months occurs before the taxpayer has begun making estimated tax payments, installment payments shall be made as follows:
Tax 2.89(7)(b)1. 1. If one installment is due, all of the estimated tax shall be paid at that time.
Tax 2.89(7)(b)2. 2. If 2 installment payments are due, 75% of the estimated tax shall be paid for the first installment and 25% shall be paid for the remaining installment.
Tax 2.89(7)(b)3. 3. If 3 installment payments are due, 50% of the estimated tax shall be paid for the first installment and 25% shall be paid for each of the 2 remaining installments.
Tax 2.89(7)(b)4. 4. If 4 installment payments are due, 25% of the estimated tax shall be paid for each installment.
Tax 2.89 Note Examples: 1) Corporation E owns 100% of the stock of Corporation F. The corporations file consolidated federal income tax returns on a calendar-year basis. On March 10, Corporation E sells all of the stock of Corporation F to third parties, severing the affiliated group. For federal purposes, Corporations E and F file a consolidated return for the period from January 1 through March 10. Corporation F files a separate federal return for the period from March 11 through December 31. Since the taxable period for Wisconsin purposes is the same as the federal taxable year, Corporation F must also file 2 short-period Wisconsin returns. For the first taxable year, Corporation F must make one estimated tax installment payment for 100% of the estimated tax liability on or before March 15. For the second short period, Corporation F must make 3 estimated tax installment payments. The first payment for 50% of the estimated tax liability is payable on or before June 15. Since March is the last month of the first short period, April is treated as the first month of the second short period. The second and third payments, each for 25% of the estimated tax, are due on or before September 15 and December 15, respectively. If Corporation F's estimated tax for the period beginning March 11 and ending December 31 is $150,000, Corporation F must pay $75,000, 50% x $150,000 estimated tax payable, for the first installment and $37,500, 25% x $150,000 estimated tax payable, for each of the remaining 2 installments.
Tax 2.89 Note 2) Corporation G buys 100% of the stock of Corporation H on August 29. Both corporations compute their incomes on a calendar-year basis. Corporations G and H file a consolidated federal income tax return for the period from August 30 through December 31. Corporation H files a separate federal return for the period from January 1 through August 29. Since the taxable year is the same for Wisconsin and federal purposes, Corporation H must file 2 short-period Wisconsin returns. For the first short taxable year, 3 estimated tax installment payments are required, due on or before March 15, June 15 and August 15. Twenty-five percent of the estimated tax shall be paid for each of the installments due March 15 and June 15 and the balance of the estimated tax shall be paid for the installment due August 15. For the second short period, 2 installments are payable on or before November 15 and December 15. Since August is the last month of the first short period, September is treated as the first month of the second short period. The first installment payment, due November 15 is for 75% of the estimated tax and the payment due December 15 is for 25% of the estimated tax.
Tax 2.89(8) (8) Annualized income installment payments. Under ss. 71.09 (13) (d) and 71.29 (9) (c), Stats., taxpayers may compute estimated tax installment payments by annualizing income for the months in the taxable year ending before the installment payment's due date. Corporations that are subject to a tax on unrelated business taxable income and virtually exempt entities may compute estimated tax installment payments by annualizing income for the months in the taxable year ending before the date one month before the due date for the installment payment. Annualized income installment payments shall be computed as follows:
Tax 2.89(8)(a) (a) Computation of annualized income. Taxpayers shall annualize income for the annualization period as follows:
Tax 2.89(8)(a)1. 1. Compute the Wisconsin net income for the annualization period, excluding adjustments which remain constant from period to period, such as net business loss carryforwards and the amortization of adjustments for changes in the method of accounting.
Tax 2.89(8)(a)2. 2. Calculate the annualization factor for the annualization period by dividing the number of months in the taxable year by the number of months in the annualization period.
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Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published.