The Minnesota Department of Revenue has released the 2017 withholding tax guide, computer formula and wage-bracket withholding tables to its website (see Attachment). The annual computer formula in effect for wages paid on and after January 1, 2017 is shown below.

A state legislature-passed omnibus tax bill that would have accelerated the deadline for filing the state copy of Forms W-2 with the Department from February 28 to January 31, eliminated the need to file an annual withholding reconciliation form and modified the threshold at which small employers are allowed to file withholding returns was left to expire unsigned by Governor Dayton, a move known as a "pocket veto." (HB 848) (See Tax Alert 2016-1017.)

As a result, the deadline to file 2016 Forms W-2 with the Department remains at February 28, 2017.

Supplemental withholding rate for 2017

The supplemental rate of income tax withholding is unchanged at 6.25% (.0625).

Overtime, commissions, bonuses and other supplemental payments. Supplemental payments made to an employee separately from regular wages are subject to the 6.25% Minnesota withholding regardless of the number of withholding allowances the employee claimed. Multiply the supplemental payment by 6.25% (.0625) to calculate the Minnesota withholding.

If you make supplemental payments to an employee at the same time you pay regular wages and you list the two payments separately on the employee's payroll records (regardless of whether you list the amounts separately on the paycheck), choose one of the following methods to determine how much to withhold:

Method 1. Add the regular wages to the supplemental payment and use the tax tables to find how much to withhold from the total.

Method 2. Use the tax tables to determine how much to withhold from the regular wages alone. Multiply the supplemental payment by 6.25% (.0625) to determine how much to withhold from that payment.

If you do not list the regular wages and the supplemental payment separately on the employee's payroll records, you must use Method 1.

Backup withholding

Minnesota follows the federal provisions for backup withholding on nonwage pay­ments for personal services. Personal services include work performed for your business by a person who is not your employee. If the person performing services for you does not provide a Social Security or tax ID number or if the number is incorrect, you must withhold tax equal to 9.85% (.0985) of the payment(s). If you do not, you may be assessed the amount you should have withheld. The assessment is subject to penalty and interest.

Electronic filing of Forms W-2 for calendar year 2016

For the filing of Forms W-2 and 1099 with Minnesota withholding for calendar year 2016, employers filing 10 or more Forms W-2/1099 continue to be required to file electronically by February 28, 2017.

Fact Sheet 2 for Form W-2 filing is available here.

Fact Sheet 2a for Form 1099 with Minnesota withholding filing is available here.

The deadline to file calendar year 2016 Forms W-2/1099 with the Department remains February 28, 2017 because the governor failed to sign legislation into law that would have accelerated the deadline to match the federal deadline of January 31, 2017.

Also, the Department only requires that Forms 1099 be filed if the form shows Minnesota withholding. The Department is not following the federal requirement that Forms 1099-MISC showing nonemployee compensation in box 7 be filed.

For more information on Minnesota withholding tax, see the Department's website.

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ATTACHMENT

Minnesota income tax withholding computer formula