Watch withholding rules for out-of-state drivers working in Wisconsin

February 8, 2018|Michelle Wood

Interstate rail and motor carriers paying wages to nonresidents who work in Wisconsin may qualify for different income tax withholding rules.

It can be common to have drivers coming from other states to help haul freight. What happens when these drivers are your employees who live out-of-state? Be aware of income tax withholding requirements in these situations.

Normally all wages paid to nonresidents for services performed in Wisconsin are subject to withholding unless:

  • The employer is an interstate rail or motor carrier, subject to the jurisdiction of the federal Interstate Commerce Commission, and the employee regularly performs duties in two or more states. Federal law follows the single state tax withholding and limits the ability of states from subjecting income tax to employees in a state other than their residence state.
    • These employees cannot regularly be assigned to duties only in Wisconsin.
    • These employees are only taxed in their legal state of residence and not required to file a Wisconsin income tax return.

Nonresidents must have a permanent legal residence in a state other than Wisconsin.

For employees who are part-year residents of Wisconsin, you are required to withhold Wisconsin income tax only during the period for which the employee is a Wisconsin resident.

You will need to verify with the other states if they have a requirement to withhold tax for those states in which the employee is a resident. When there is no requirement, it is the employee’s responsibility to make their own state estimate payments.

If the employee is a resident of the reciprocity states of Illinois, Kentucky, Indiana or Michigan, you could ask them to complete Wisconsin Form W-220 (Nonresident Employee’s Withholding Reciprocity Declaration).

More information on Wisconsin withholding is available in the following publications:

For more information or assistance, contact Michelle Wood or another member of Schenck’s Trucking & Logistics team at 800-236-2246.

Michelle Wood, EA, is a manager and has more than 20 years of public accounting experience working with a wide variety of closely held businesses, individuals and not-for-profit organizations. As a member of the firm’s Hospitality & Retail team, she provides a wide range of services including tax planning, sales tax and payroll tax compliance, and financial statement review.