Negotiators trying to work out a tax reciprocity agreement between Minnesota and Wisconsin remain deadlocked as a deadline approaches.
Tuesday is the cutoff date to sign a new deal allowing interstate commuters to file one state tax return for 2014 income taxes, tax officials said.
"Oct. 1 is hard deadline," said Minnesota Revenue Commissioner Myron Frans.
Tax officials need three months to change tax forms and withholding instructions and to give employers time to adjust taxes to be withheld beginning Jan. 1.
The lack of an agreement would mean that 80,000 taxpayers who live in one state and work in another would be required to continue filing two state tax returns.
"It is not only a headache for tax filers, who are filing double returns, but also for the businesses that are doing double accounting on the (tax) withholding," said Minnesota DFL Sen. Roger Reinert, of Duluth.
Under an agreement in effect from 1968 to 2009, Wisconsin compensated Minnesota for revenue it would have raised by taxing Badger State residents who crossed the border for work. Minnesota ended the agreement because it was losing money on the deal.
The states disagree over the credit offered to taxpayers for taxes paid to another state, the St. Paul Pioneer Press reported.
Minnesota limits the credit it offers taxpayers for taxes paid to another state to the amount they would pay if they lived in Minnesota. Wisconsin offers full credit for taxes paid to other states. Minnesota wants Wisconsin to pay $6 million more to compensate for the difference between the two states' tax codes.
An estimated 56,000 Wisconsin residents work in Minnesota. About 24,000 Minnesotans commute to jobs in Wisconsin.