Wisconsin: Pass-Through Entity Quarterly Estimated Withholding Tax Payments

According to the Wisconsin Department of Revenue, September 15, 2009, marked the first time many calendar year pass-through entities were required to make quarterly estimated withholding tax payments.

To assist with the implementation of this change, Wisconsin has posted "transitional" guidelines.

Date Dates of Installments

Except as provided during the transition period, a pass-through entity shall make quarterly payments of withholding tax on or before the 15th day of the 3rd, 6th, 9th, and 12th month of the taxable year.

GRACE PERIOD (THIS YEAR)

Section 71.775(4)(L), Wis. Stats., provides a transition or grace period for making estimated payments of withholding tax that become due less than 45 days after July 1, 2009. The due date of these payments is extended to the next subsequent installment due date. For example,

1. A pass-through entity on a calendar year basis would have made its first payment subject to these new provisions on September 15, 2009. This payment would have accounted for the 1st, 2nd, and 3rd installment payments.


2. A pass-through entity on a fiscal year beginning on February 1, 2009, will make its first payment subject to these new provisions on October 15, 2009. This payment must account for the 1st, 2nd, and 3rd installment payments.


3. A pass-through entity on a fiscal year beginning on March 1, 2009, would have made its first payment subject to these new provisions on August 15, 2009. This payment would have accounted for the 1st and 2nd installment payments.


4. A pass-through entity on a fiscal year beginning on June 1, 2009, would have made its first payment subject to these new provisions on August 15, 2009. This payment would have only accounted for the 1st installment payment.

Required Installments

The required amount of each installment (except if computing annualized income under sec. 71.775(4)(h)), Wis. Stats., is 25% of the lesser of the following amounts: (1) 90% of the withholding tax that is due for the taxable year; or (2) the withholding tax due for the preceding taxable year.

The second option does not apply if the preceding taxable year was less than 12 months or if the pass-through entity did not file a return for the preceding taxable year.

In case of any underpayment of quarterly estimated withholding tax, a pass-through entity shall add interest to the aggregate withholding tax for the taxable year at the rate of 12% per year on the amount of the underpayment for the period of the underpayment.

“Period of the underpayment” means the time period beginning with the due date of the installment and ending on either the unextended due date of the return or the date of payment, whichever is earlier. If 90% of the tax due for the taxable year is not paid by the unextended due date of Form PW-1, the difference between that amount and the estimated taxes paid, along with any interest due, shall accrue delinquent interest in the same manner as income and franchise taxes.

However, no interest is required if any of the following conditions apply: (1) the amount of withholding tax due is less than $500; or (2) the amount of withholding tax due is less than $5,000, the pass-through entity had no withholding tax liability for the preceding taxable year, and the preceding taxable year was 12 months.

NEED ADDITIONAL INFORMATION?

For additional information, including information on how to handle withholding exemptions when computing installments, claiming the Form PW-2 affidavit exemption, and how to make electronic payments, see the Wisconsin DOR Website.

If you have questions or need assistance in resolving this compliance matter, please contact me at brian.strahle@bakertilly.com or 612.876.4824.