By Payroll and Entitlements Editorial Staff
The Minnesota Department of Revenue has revised its guidance regarding personal income withholding tax responsibilities as they relate to household employees, agricultural workers, corporate officers, nonresident entertainers, and new employers.
Household employees. Household workers are employees if a taxpayer controls not only what household work is done, but also how it is done. The guidance clarifies that taxpayers are not required to withhold Minnesota income tax from the wages of household employees. However, tax can be withheld if the household employee asks a taxpayer to withhold and the taxpayer agrees to it. Taxpayers employing household employees are required to pay electronically if they withheld more than $10,000 during the last 12-month period ending June 30 or are required to electronically pay any other Minnesota business tax. All withholding tax returns, including past-due and amended returns, must be filed electronically using e-Services or by phone. The guidance also discusses registration requirements, applicability of other employment taxes, and federal and state withholding allowances. (Withholding Tax Fact Sheet No. 7, Minnesota Department of Revenue, January 2019.)
Agricultural workers. Taxpayers employing agricultural workers are required to pay electronically if they withheld more than $10,000 during the last 12-month period ending June 30, pay electronically any other Minnesota business tax, or use a payroll service company. If the agricultural workers are paying business taxes electronically for one year, they must continue to do so for all future years. All withholding tax returns, including past-due and amended returns, must be filed electronically using e-Services or by phone using e-File Minnesota. Additionally, taxpayers must electronically submit Form W-2, Wage and Tax Statement, by January 31 each year to the department for each employee to whom they paid wages during the year. (Withholding Tax Fact Sheet No. 3, Minnesota Department of Revenue, January 2019.)
Corporate officers. Corporate officers who provide services for a corporation (whether an S corporation or a C corporation) are considered employees of the corporation, and should be paid a reasonable wage for services performed. Minnesota income tax must be withheld from any compensation given to officers, including cash, goods, or services, in exchange for working. However, Minnesota tax should not be withheld from nonresidents who will earn less in Minnesota wages than the minimum income required to file a Minnesota personal income tax return. The minimum filing requirement changes each year and is equal to one standard deduction for a single filer, regardless of the employee’s filing status, plus one personal exemption. For 2019, this amount is $10,900 (previously, $10,650). Taxpayers are required to pay electronically if they have withheld more than $10,000 during the last 12-month period ending June 30, or paid any other Minnesota business tax electronically, or used a payroll service company. Taxpayers are also reminded that all withholding tax returns, including past-due and amended returns, must be filed electronically using the department’s filing and paying systems. (Withholding Tax Fact Sheet No. 6, Minnesota Department of Revenue, January 2019.)
Nonresident entertainers. Compensation received by a nonresident entertainer or entertainment entity for performances in Minnesota is subject to a 2% nonresident entertainment tax. The nonresident entertainment tax replaces the regular Minnesota income tax. Taxpayers are not required to file Form ETR, Nonresident Entertainer Tax Return, if the nonresident entertainer compensation received for the year is less than the minimum filing requirement for filing a Minnesota personal income tax return. For 2019, the amount is $10,900 (previously, $10,650). The updated guidance provides a definition of “entertainer” and “entertainment entity.” Further, it discusses gross compensation; compensation subject to nonresident entertainer withholding tax; exceptions; reciprocity information; partnerships and S corporations; wages not subject to nonresident entertainer tax; guidelines for promoters; form and payment information. Finally, it provides a list of examples. (Withholding Tax Fact Sheet No. 11, Minnesota Department of Revenue, January 2019.)
New employers. The updated fact sheet states that, to register for a Minnesota tax identification number, taxpayers must apply online at www.revenue.state.mn.us and choose “Business Center” (previously, “Starting a Business”). The fact sheet discusses, among other things, federal and state registration requirements; federal requirements for new employees, including verification of work eligibility and Social Security numbers, Form W-4, Social Security and Medicare, and the federal unemployment tax. It also discusses Minnesota requirements for new employees, including Form W-4MN, Minnesota Employee Withholding Allowance/Exemption Certificate; reciprocity; construction contractor withholding; state unemployment tax; worker compensation insurance; and reporting of new hires. (Withholding Tax Fact Sheet No. 10, Minnesota Department of Revenue, January 2019.)
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