Minnesota Withholding laws & HR compliance analysis

Minnesota Withholding: What you need to know

All Minnesota employers are required to deduct state income tax from the paychecks of both resident and nonresident employees. Withholding may be based on wage bracket withholding tables or a computer formula provided by the Department of Revenue (DOR).
Beginning in 2020, federal Form W-4 no longer computes allowances used to determine Minnesota withholding tax. All new employees, and those who complete a new federal Form W-4, must also complete a Form W-4MN. If an employee does not complete a Form W-4MN, the employer must withhold tax at the single filing status with zero allowances.
If an employer receives a Letter 2800C from the Internal Revenue Service indicating that an employee may have filed an incorrect federal Form W-4, the employer must provide the DOR with a copy of the employee’s Form W-4MN. The department will then verify the number of allowances the employee may claim for Minnesota purposes, and notify the employer if the Form W-4MN needs to be changed accordingly.
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Supplemental payments. If an employer makes supplemental payments to an employee at a different time than it pays regular wages, the tax tables are not used to determine how much to withhold. Instead, regardless of the number of withholding allowances the employee claimed, the required withholding is 6.25 percent of the payment. If a supplemental payment is made to an employee at the same time regular wages are paid and the two payments are listed separately on the employee’s payroll records (regardless of whether the amounts are listed separately on the paycheck), one of the following methods may be used to determine how much to withhold:
Method 1. Add the regular wages to the supplemental payment, and use the tables to find how ...

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