We, landlords, are being sued by former tenant for failure to remit security deposit in timely manner.

If you used a standard Wisconsin annual lease, I suspect you do have a case. Under such a lease, she would liable for the rent through June 30, subject to mitigation by payment from the replacement tenant. It depends on the terms of your lease. [Do not post here.] I recommend consulting with a Milwaukee landlord/tenant lawyer.

I cannot give you a definitive answer without knowing more facts; however, you may have a problem with the timing of the return of the security deposit and/or submission to the tenant of an itemization of damages. Wisconsin law requires you to submit that within 21 days of the lease termination date. There may be a factual issue as to whether you accepted the tenant's surrender of the premises prior to the written lease termination date. If the tenant prevails, you could be liable for twice the amount unjustifiably withheld, plus the tenant's attorneys' fees. I think it is worthwhile to seek counsel from a Wisconsin real estate attorney.