Minnesota Salary Paycheck Calculator
We’ve compiled some of the top frequently asked questions about payroll taxes in Minnesota. Keep reading to take the mystery out of payroll taxes.
Minnesota payroll taxes
Does Minnesota have a personal income tax?
Answer: Yes. Minnesota has a progressive tax system with rates ranging from 5.35% to 9.85%.
Without a flat tax rate, how do I calculate the amount to withhold from my employees’ paychecks?
Answer: The withholding amount is primarily based on the number of allowances an employee claims and their paycheck amount.
Your employees will tell you their allowances using Form W-4MN. Using this form and withholding tax tables, you can calculate the correct amount. If you use payroll software, it will make the calculations for you.
Employees are required to fill out both federal Form W-4 and Minnesota Form W-4MN. Typically you won’t have to send the form to the Minnesota Department of Revenue, but there are exceptions. Learn more about how to complete Form W-4.
Because Minnesota has tax reciprocity agreements with North Dakota and Michigan, if you have employees who are residents of either of these two states, they don’t have to have Minnesota income tax withheld from their pay. They must complete Form MWR to let you know.
Do my employees need to complete a Form W-4MN each year?
Answer: Maybe. A new Form W-4MN is only necessary when the number of allowances changes due to a lifestyle change. If your employee claims to be exempt from Minnesota income tax, a new form is required by February 15 each year.
When and how do I send the Minnesota withholding tax to the state?
Answer: Depending on how much tax you withhold each month determines how often you need to pay. Deposit frequencies are:
In addition to sending the tax to the state, you’ll need to file payroll tax returns. Unless you are an annual depositor, you’ll file your payroll tax returns for each calendar quarter. And you’ll need to file a return even if you have no taxes withheld in a quarter.
Please explain a bit about the Minnesota unemployment tax.
Answer: To help workers who lose their job through no fault of their own, Minnesota imposes a tax on employers.
For 2022, employers pay the Minnesota unemployment tax on the first $38,000 of an employee’s wages. Rates range from 0.1% to 8.9% in 2022, depending on your claims history, with new employers receiving rates based on their industry’s average rate.
Similar to the withholding tax, you’ll need to file a quarterly report and pay the tax.
What is the salary threshold in Minnesota?
Because the state of Minnesota doesn’t have its own salary threshold, it adheres to the federal salary threshold, which is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
When does an employer need to have Workers’ Compensation insurance in Minnesota?
Answer: 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.
Are there other Minnesota paycheck rules I need to know?
Answer: You should keep the following rules in mind.
- New hires – Report new or rehired employees within 20 days of starting work.
- Pay dates – You must pay your employees at least every 31 days.
- Final paychecks – If you let an employee go, you must pay them their final wages immediately. If an employee leaves, you have until the next regular payday.
- Paid time off/Sick leave – Minnesota doesn’t require employers to provide vacation or sick leave. But you will have to provide up to 16 hours of unpaid leave each year for employees who work at least half time so the parent can attend their child’s activities or school conferences.
- Saint Paul requires employers to provide paid sick and safe leave to employees. Employees must earn at least one hour of leave for every 30 hours worked.
- Minneapolis requires employers with at least six employees to provide paid sick leave at a rate of one hour for every 30 hours worked. And employers with fewer than six employees must give the same amount of sick leave, but they choose whether it’s paid.
Federal payroll taxes for Minnesota employers
Do I need to withhold federal income tax from my employees’ pay?
Answer: Yes, unless an employee is exempt from federal income tax. You’ll know whether they are exempt when they complete Form W-4.
Form W-4 should be completed by an employee by their first day of employment. The information on this form will determine how much tax you’ll withhold. Tax filing status and the number of dependents affect how much is withheld.
How does FICA tax work?
Answer: 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. FICA tax is paid equally by both the employer and employee, and it’s made up of the Social Security tax and the Medicare tax.
|Social Security tax||6.2% on the first $147,000 of each employee’s wage in 2022|
|Medicare tax||1.45% on all of an employee’s wages each year|
Are there other federal payroll taxes I need to pay?
Answer: You’ll need to pay federal unemployment tax, and some of your employees may need to pay the Additional Medicare tax.
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.
Additional Medicare tax
Some of your employees may need to pay the Additional Medicare tax. If you have any employees earning more than $200,000 per year, you’ll need to withhold 0.9% on the excess.
How do I pay these federal taxes to the IRS?
Answer: The IRS requires you to pay these taxes annually, quarterly, monthly, or semi-weekly depending on the amount of tax owed. If you have taxes that are more than $100,000 in a day, you are required to deposit the taxes with the IRS by the next business day.
FICA, federal income tax, and Additional Medicare tax are paid most frequently, either monthly or semi-weekly. Annual or quarterly payments are not an option. However, each quarter you will have to provide a summary on Form 941.
The federal unemployment tax is generally paid annually using Form 940. But for employers with a tax of more than $500, quarterly payments are required.
The information provided by the Employer Tax Calculator is for general information and estimation. All of the taxes or fees that apply to your business may not be accounted for, or fully up to date. Gusto, Inc. (dba “Gusto”) does not promise or guarantee that the information in the Employer Tax Calculator is accurate or complete, and Gusto expressly disclaims all liability, loss or risk incurred by employers or employees as a direct result or an indirect consequence of its use. By using the Employer Tax Calculator, you waive any rights or claims you may have against Gusto in connection with its use.