Tax 2.88 NoteNote: 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 NoteNote: 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 HistoryHistory: 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 2.89Tax 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 NoteNote: 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)(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)(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)(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 NoteNote: 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 NoteExample: 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 NoteNote: 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 NoteExamples: 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 Note2) 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 NoteExamples: 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 Note2) 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. Tax 2.89(8)(a)3.3. Multiply the amount computed in subd. 1. by the annualization factor computed in subd. 2. Tax 2.89(8)(a)4.4. Subtract from the result in subd. 3. any adjustments excluded from the calculation of Wisconsin net income in subd. 1. which remain constant for each period. Individuals shall also subtract the standard deduction. Tax 2.89 NoteExample: Corporation J’s taxable year begins January 1 and ends May 10. It has Wisconsin net income of $200,000 for the period from January 1 through February 28. Corporation J’s annualization factor for that period is 2.5, calculated by dividing the 5 months of the taxable year by the 2 months of the annualization period. The annualized income for that period is $500,000, which is $200,000 Wisconsin net income x 2.5 annualization factor.
Tax 2.89(8)(b)(b) Computation of installment payments. Taxpayers shall calculate their estimated tax installment payments based on annualized income for the annualization period as follows: Tax 2.89(8)(b)2.2. Subtract from the gross tax under subd. 1. any allowable tax credits, excluding estimated tax paid. Tax 2.89 NoteExample: Corporation K, a calendar year filer, merges into Corporation L on July 14. Corporation K elects the annualized income method for determining whether it paid sufficient estimated tax. Corporation K’s Wisconsin net income is $300,000 for the first 2 months of the taxable year, $1,400,000 for the first 5 months of the taxable year, and $1,800,000 for the first 6 months of the taxable year. Corporation K has $9,000 of tax credits and its net tax due for the year ending July 14 is $135,000. Therefore, Corporation K’s estimated tax payable is $121,500. For Corporation K’s 7-month year, the annualization factors are 3.5 (7 months/2 months), 1.4 (7 months/5 months), and 1.167 (7 months/6 months). Corporation K calculates its required estimated tax payments as follows:
Tax 2.89 NoteNote: After the end of the taxable year, persons other than corporations shall use Schedule U and corporations shall use Form U to determine whether they have made sufficient estimated tax payments. Taxpayers with short taxable years shall adjust the computations on those forms as provided in this section.
Tax 2.89(9)(9) Combined groups. For purposes of estimated tax requirements, a combined group of corporations under s. 71.255 (1) (a), Stats., or a commonly controlled group under s. 71.255 (2m), Stats., shall be treated as if it were a single corporation. Tax 2.89 NoteNote: See s. Tax 2.66 for rules relating to the payment of estimated taxes by combined groups. Tax 2.89 HistoryHistory: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 10-095: am. (4) (intro.), cr. (9) Register November 2010 No. 659, eff. 12-1-10; CR 19-141: am. (4) (b) to (d) Register September 2020 No. 777, eff. 10-1-20. Tax 2.89 AnnotationCross References: See s. Tax 2.60 for combined reporting definitions relating to this section. See s. Tax 2.63 for rules relating to the controlled group election under s. 71.255 (2m), Stats. See s. Tax 2.65 for rules relating to the designated agent. See s. Tax 2.66 for rules relating to the payment of estimated taxes by combined groups.
Tax 2.90(1)(1) The term “wages” means all remuneration for services performed by an employee for an employer unless specifically excepted under s. 71.63, Stats. Tax 2.90(2)(2) The name by which remuneration for services is designated is immaterial. Thus, salaries, fees, bonuses, commissions on sales, commissions on insurance premiums, pensions and retirement pay, and supplemental unemployment benefits are wages within the meaning of the statute if paid as compensation for services performed by the employee for the employee’s employer. Tax 2.90(3)(3) The basis upon which the remuneration is paid is immaterial in determining whether the remuneration constitutes wages. Thus it may be paid on the basis of piecework, or a percentage of the profits, and may be paid hourly, daily, weekly, monthly or annually. Tax 2.90(4)(4) Generally the medium in which the remuneration is paid is also immaterial. It may be paid in cash or in something other than cash, as, for example, stocks, bonds or other forms of property. However, s. 71.63 (6) (i), Stats., excludes from wages remuneration paid in any medium other than cash for services not in the course of the employer’s trade or business. If services are paid for in a medium other than cash, the fair market value of the thing taken in payment is the amount to be included as wages. If the services were rendered at a stipulated price, in the absence of evidence to the contrary, such price will be presumed to be the fair value of the remuneration received. If a corporation transfers to its employees its own stock as remuneration for services rendered by the employee, the amount of such remuneration is the fair market value of the stock at the time of the transfer. Tax 2.90(5)(5) Remuneration for services, unless the remuneration is specifically excepted by the statute, constitutes wages even though at the time paid the relationship of employer and employee no longer exists between the person in whose employ the services were performed and the individual who performed them. Tax 2.90(7)(7) Amounts paid specifically — either as advances or reimbursements — for traveling or other bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred in the business of the employer are not wages and are not subject to withholding. Traveling and other reimbursed expenses must be identified either by making a separate payment or by specifically indicating the separate amounts where both wages and expense allowances are combined in a single payment. Tax 2.90(8)(8) Amounts of so-called “vacation allowances” paid to an employee constitutes wages. Thus the salary of an employee on vacation, paid notwithstanding the absence from work, constitutes wages. Tax 2.90(9)(9) Any payments made by an employer to an employee on account of dismissal, that is, involuntary separation from the service of the employer, constitutes wages regardless of whether the employer is legally bound by contract, statute or otherwise to make such payments. Tax 2.90(10)(10) Any amount deducted by an employer from the remuneration of an employee is considered to be a part of the employee’s remuneration and is considered to be paid to the employee as remuneration at the time the deduction is made. It is immaterial that any act or law requires or permits such deductions. Tax 2.90(11)(11) The term “wages” includes the amount paid by an employer on behalf of an employee, without deduction from the remuneration of or other reimbursement from the employee, on account of any tax imposed upon the employee by any taxing authority. Tax 2.90(12)(12) The value of any meals or lodging furnished to an employee by an employer is not subject to withholding if the value of the meals or lodging is excludable from the gross income of the employee under the provisions of the Internal Revenue Code, as defined in s. 71.01 (6), Stats. Tax 2.90(13)(13) Ordinarily, facilities or privileges, such as entertainment, medical services, or so-called “courtesy” discounts on purchases furnished or offered by an employer to employees generally, are not considered as wages subject to withholding, if the facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, good will, contentment or efficiency of employees. Tax 2.90(14)(14) Tips or gratuities paid directly to an employee by a customer of an employer, are excepted from withholding only if the tips are non-cash tips or if the cash tips received during the course of a month are less than $20. Tax 2.90(15)(a)(a) Upon amounts paid to an employee by the employee’s employer under a wage continuation plan for a period during which the employee is absent from work on account of personal injuries or sickness if such amounts are exempt from withholding taxation under the Internal Revenue Code, as defined in s. 71.01 (6), Stats. Tax 2.90(15)(b)(b) When, as provided by s. 71.66 (3), Stats., an employee certifies to an employer that the employee incurred no liability for income tax for the preceding taxable year and anticipates not incurring a liability for the current taxable year.
