Minnesota Hourly Paycheck Calculator
Does the thought of Minnesota payroll taxes make you cringe? Don’t worry! We will get you up and running ASAP with a quick rundown of payroll taxes in Minnesota. But if you’d rather have someone else take the lead, no problem. Experienced accountants and payroll software can tackle the most nerve-wracking payroll challenges with ease.
Payroll taxes in Minnesota
Minnesota income tax withholding
The personal income tax rates in Minnesota range from 5.35% to 9.85%, depending on how much you make and your tax filing status. As a Minnesota employer, you’re tasked with withholding some of this tax from your employees’ wages.
New employees should fill out federal Form W-4, Employee’s Withholding Certificate. They must also complete Minnesota Form W-4MN. Information on the Minnesota form will help you calculate the amount of tax to withhold.
If your employee lives in North Dakota or Michigan, they can opt-out of having Minnesota personal income tax withheld from their wages.
When they are first hired, they must complete Form MWR, Reciprocity Exemption/Affidavit of Residency, within 30 days of starting work and complete it every year by February 28 to remain exempt from withholding.
Filing and paying Minnesota withholding tax
You must file withholding tax returns if you withheld income taxes from your employees’ wages. If you don’t have employees or withheld no tax, you still need to file a $0 return with the Minnesota Department of Revenue.
File online through e-Services or by phone. Paper returns aren’t accepted in Minnesota. You will create a payroll schedule that includes the dates you paid your employees along with the amount withheld for each pay date.
Generally, if you withhold less than $500 by December 1, you may file annually. Otherwise, you will file quarterly.
Withholding deposits of $1,500 or more are due depending on when the IRS requires you to deposit. You will mirror the IRS’ schedule, whether that is semi-weekly or monthly.
State unemployment insurance in Minnesota
You will pay unemployment insurance taxes quarterly into the Minnesota Unemployment Insurance Trust Fund. The first $38,000 of your employees’ wages are taxable in 2022.
Rates are determined by a combination of a base rate and an employer’s experience rating. The experience rating depends on the benefits paid to your former employees—rates in 2022 range from 0.1% to 8.9%. New employers receive a rate based on the average for their industry.
The Minnesota Department of Employment and Economic Development (DEED) will calculate and mail your tax rates each December. Your employment history and the balance of the unemployment insurance trust fund determine your rate.
You will file a quarterly wage detail report, even if no wages are paid. The report is due the last day of the month following the quarter’s end.
Federal payroll taxes in Minnesota
In addition to the state payroll taxes, all Minnesota employers and employees pay various federal payroll taxes. There are five you should be aware of.
These taxes are employee-paid:
- Federal income tax
- Additional Medicare tax
This tax is employer-paid:
- Federal unemployment tax
These taxes are shared by the employee and employer:
- Social Security tax
- Medicare tax
Federal income tax
You’ll use Form W-4 to calculate how much federal income tax to withhold from your employees’ pay.
Employees should complete Form W-4 when hired. If your employees have life changes, such as getting married, divorced, or having a child—then they should fill out a new form. Such changes can have an impact on the amount of tax they will owe.
You’ll use the information on the W-4 along with tax tables to compute the tax withholding. Thankfully, payroll software can make the calculations for you if you don’t want to do this manually.
Additional Medicare tax
You may have high-earning employees who owe the Additional Medicare tax. Any employee earning more than $200,000 per year must have this tax withheld from their pay. The rate for 2022 is 0.9%.
Federal unemployment tax
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but most employers only have to pay 0.6% each year.
Social Security and Medicare tax
The Federal Insurance Contributions Act, or FICA tax, is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
Filing and paying Federal payroll taxes
You’ll need to send the withheld taxes and your portion of FICA to the IRS either monthly or semi-weekly, depending on how much tax you owe. Each quarter you will need to do a summary report on Form 941.
You will need to make quarterly payments for federal unemployment tax if your tax is greater than $500. If your tax is less than $500 a year, you can pay the tax when you complete your annual summary report on Form 940.
Other Minnesota paycheck laws
Here are some other paycheck laws in Minnesota you should know about.
- New hires: You must report new or rehired employees to the Minnesota New Hire Reporting Center within 20 days of hire.
- Minimum wage: The state minimum wage in Minnesota is adjusted each year for inflation. Employers with annual gross revenues greater than $500,000 are considered a large employer and must pay a higher rate.
|Minimum Wage in Minnesota for 2022|
|Small-employer wage||Large-employer wage|
|$8.42 per hour||$10.33 per hour|
Both Saint Paul and Minneapolis have their own minimum wage laws for time worked within the city limits.
|Saint Paul Minnesota Minimum Wage at January 1, 2022|
|5 or fewer employees||6-100 employees||101-10,000 employees||10,001 + employees|
|$10.75 per hour||$12.00 per hour||$13.50 per hour||$15.00 per hour|
|Minneapolis Minnesota Minimum Wage|
|Effective Date||Businesses with 100 or fewer employees||Businesses with more than 100 employees|
|July 1, 2022||$13.50 per hour||$15.00 per hour|
|July 1, 2023||$14.50 per hour||$15.00 per hour|
|July 1, 2024||$15.00 per hour||$15.00 per hour|
- Overtime: Anything over 48 hours in a workweek is considered overtime and is paid at least 1.5 times the regular hourly pay rate.
- Pay dates: You must pay your employees regularly. Wages must be paid at least once every 31 days, while commissions must be paid out at least every three months.
- Paid time off/Sick time: You are not required to provide vacation or sick leave. But for any employee who works at least half time, you must provide up to 16 hours of unpaid leave each year, and for each child, so that parents can attend the child’s conferences or activities.
- Saint Paul requires employers to provide paid sick and safe leave to employees at a rate of one hour for every 30 hours worked.
- Minneapolis requires employers with six or more employees to offer paid sick time for those employees who work in Minneapolis. Employees get one hour of accrued sick time for every 30 hours worked, up to a maximum of 48 hours. Employers with fewer than six employees must provide the same sick time but can choose whether it is paid or unpaid.
- Final paychecks: If you fire or lay off an employee, you must pay them their final wages immediately. If your employee quits, you have until the next regular payday.
- Workers’ Compensation insurance: Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
Now that you’re up to speed on the payroll taxes and paycheck rules in Minnesota, you’re ready to pay your employees.