Archive for the ‘Wisconsin’ Category

How to Wynne Your Money Back in Maryland

Tuesday, September 29th, 2015

Earlier this year the US Supreme Court ruled that Maryland had to issue full tax credits–including the county add-on tax–to individuals facing double taxation (typically, Maryland residents who earned income taxed in other states). Kay Bell in Don’t Mess With Taxes today noted that the Comptroller of Maryland (Maryland’s state tax agency) has created a webpage for those impacted.

The webpage gives the basics on this, and notes that the Comptroller’s office will not be contacting impacted taxpayers. There’s a link within to a web page on the Wynne Case and the Comptroller’s office has a new form (From 502LC) designed for this specific situation. There’s also a detailed FAQ.

I also need to point out this decision likely impacts other states and jurisdictions. Other states with “add-on” local taxes include Indiana, Ohio, Kentucky, Michigan, Missouri, New York, and Pennsylvania. However, where this impacts taxpayers is residing in a state that does not allow a tax credit for local taxes (Indiana, Iowa, Kentucky, Maryland, North Carolina, and Wisconsin are some of the states so identified) and/or residing in a local jurisdiction that does not allow such a credit (jurisdictions in Ohio, Pennsylvania, Michigan, Missouri, Delaware, and Indiana have been so identified). I have not looked at each state/local jurisdiction to see who is impacted. If you think you’re impacted–remember, you would need to live in a jurisdiction that hasn’t been allowing such a tax credit and have taken such a tax credit on a recent tax return–you should contact your tax professional.

You Can Pay Employees in Cash, But…

Sunday, June 28th, 2015

…you’d better withhold payroll taxes. One Milwaukee restaurant owner is alleged to have forgotten that minor detail. He also allegedly didn’t include all of his cash receipts on his tax returns.

Paul Bouraxis operates three Milwaukee-area restaurants. Judging from his tax returns, the restaurants weren’t doing that well. The Department of Justice believes that a better way of judging is the $3.7 million in cash and silver in banks in the United States and Greece. ($1.7 million in gold, silver, and cash was seized.) Mr. Bouraxis, his wife, son, and son-in-law are all alleged to have skimmed cash from the business, filed phony tax returns (both personal and payroll taxes). A part-owner of one of the restaurants, Gus Koutromanos, also allegedly participated in the scheme.

The DOJ found that the accountant for the businesses participated in the scheme, too. Scott Sherman of Sheboygan will plead guilty to one count of filing a false tax return; he’ll likely testify (if need be) against the Bouraxis family if the case goes to trial.

The family is all facing extended stays at ClubFed if found guilty.

The Real Impact of the Wynne Decision

Tuesday, May 19th, 2015

Yesterday’s decision in Comptroller of the Treasury of Maryland v Wynne Et Ux generated some reporting in print media. Yet much of what I saw was incorrect in part or in whole.

New York does give full tax credits for individuals with out-of-state income; I do not believe they will be impacted. However, many states do not give credits for local taxes. Joe Kristan highlighted Iowa today; Kentucky is another state that does not currently offer such tax credits. Under Wynne I believe they’ll be required to offer such credits. (I only know about Kentucky because I had a client impacted by this.) Joe noted that Tax Analysts saw that North Carolina and Wisconsin (along with a host of local governments) also don’t offer such credits. That’s where I think the real impact will be.

Bad States for Gamblers

Monday, October 22nd, 2012

It’s been a while since I’ve listed out the bad states for gamblers. Here’s an updated list. Make sure you read the notes because while all of these states have tax systems that are problematic for gamblers, some impact amateurs while others impact professionals. Note that I do not cover the laws that impact gambling here (such as Washington State’s law that makes online gambling a Class C felony).

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [6]
Washington [7]
West Virginia [1]
Wisconsin [1]


1. CT, IL, IN, MA, MI, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Eight Days a Month Not Enough

Thursday, September 15th, 2011

As I’ve said in the past, there are several states where being an amateur gambler is not a great thing. Wisconsin is one of those states. Yet another amateur gambler found that out the hard way.

Carol Kubsch reported $473,075 of gambling winnings and losses as an amateur, and discovered that on her Wisconsin tax return that led to $30,000 of taxes on phantom income. So she amended her returns, and tried to be considered a professional. As Taxdood reported, that didn’t work out well: “Unfortunately, a taxpayer can’t simply categorize oneself the type of gambler that produces the lesser tax bill. The professional versus amateur gambler status is a facts and circumstances determination.”

She might have gotten away with this if she hadn’t filed amended returns. Every amended return is looked at by a human.

Taxdood has more.

On Wisconsin!

Sunday, July 1st, 2007

The Wisconsin State Senate approved a $66 billion (two-year) budget last week that includes $15.2 billion in new taxes. The budget includes new or increased taxes on oil companies, cigarette sales, hospitals, vehicle registrations, and real estate transfers. The proposed budget does include universal health care (a $15 billion proposal that may violate Federal ERISA rules) and over 150 other changes.

As I read the story in the Milwaukee Journal-Sentinal
, I wasn’t surprised to find that the Democrats control the State Senate in Wisconsin. Luckily for taxpayers, Republicans control the Wisconsin State Assembly. It’s certain that the budget in its current form won’t be approved.

Wisconsin already has the 7th worst tax burden in the United States (according to the Tax Foundation). Apparently that’s not good enough for the Democrats in the Dairy State.

Wisconsin Is No Place to Gamble

Thursday, March 29th, 2007

I grew up in Chicago, and I remember vacationing at Wisconsin Dells as a child. Now Wisconsin, like many states, sports Indian casinos. Gamblers who patronize such casinos are in for a rude surprise when they complete their tax returns.

Wisconsin is one of 10 states that does not allow gamblers to deduct losses on their state tax returns. Daniel Dettwiler had gambling winnings of $99,252.60 which he duly reported on his 2002 federal tax return. He also deducted as a miscellaneous itemized deduction his gambling losses of $41,637.00 on his federal tax return. He did the same thing on his Wisconsin tax return even though Wisconsin doesn’t allow that deduction.

His case went before the Wisconsin Tax Appeals Commission, where he lost. He then appealed to a state court and lost. On Tuesday the First District Wisconsin Court of Appeals ruled on his appeal.

The Court noted,

“Effective January 1, 2000, gambling losses were no longer offset against gambling winnings under the Wisconsin tax code because, effective on that date, Wisconsin no longer permitted as a deduction from Wisconsin taxable income “[m]iscellaneous itemized deductions under the Internal Revenue Code,” see Wis. Stat. § 71.07(5)(a)7 (2003–04), one of which, the Department contends and Dettwiler does not dispute, was the deduction for “wagering losses,” under section 165(d) of the Internal Revenue Code…His contention that he should nevertheless be permitted to subtract from his Wisconsin taxable income the offset permitted by section 165(d) of the Internal Revenue Code is not only circular and without merit, but is wholly contrary to the legislature’s decision to eliminate such offsets effective January 1, 2000.

“The Tax Appeals Commission decision is perfectly logical, appropriate, and correct. Accordingly, we affirm.”

Had Mr. Dettwiler been a professional gambler, he wouldn’t have had a problem; his losses would have been deducted on Schedule C, and his net income would have been reported on his federal (and Wisconsin) tax returns. Of course, he would have been liable for the self-employment tax.

So if you’re going to gamble, you may want to avoid Wisconsin. For the record, here are the other states where gambling is much more of a gamble:

  • Connecticut
  • Illinois
  • Indiana
  • Massachusetts
  • Michigan (first $300 exempt)
  • Minnesota (because of its AMT)
  • Mississippi
  • Ohio
  • West Virginia
  • Wisconsin

Case: Dettwiler v. Wisconsin Department of Revenue

A Big Whoops in Wisconsin

Wednesday, January 3rd, 2007

Within a couple of weeks, taxpayers around the country will be receiving their tax packages in the mail from the IRS and their state (and local) tax agencies. Taxpayers in Wisconsin will get a special surprise: their social security numbers will be printed on the mailing labels of their tax packages (for those receiving Form 1 packages).

Don’t Mess with Taxes has all the details.