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Last Updated: 5/23/2018

Backup Withholding

When you pay someone who is not your employee to perform work for your business, that income is taxable and may be subject to backup withholding. Minnesota follows the federal provision for backup withholding on these payments (“personal service payments”).

Do I need to pay backup withholding?

You must withhold Minnesota income tax on personal service payments if either of the following apply:
  • The worker did not provide a Social Security or tax ID number.
  • The worker’s Social Security or tax ID number is incorrect.

You must withhold tax equal to 9.85 percent of the personal service payments. If you do not, the Minnesota Department of Revenue may assess you the amount should have withheld plus any penalties and interest.

How do I determine the amount of backup withholding?

Use our Minnesota Withholding Tax calculator.