If you make supplemental payments to employees, you must withhold Minnesota income tax just as for regular wages. There are different ways to calculate that withholding, depending on when you make the payments and how you list them on your payroll records.
The information below will help you determine what types of compensation are considered supplemental payments and how to calculate Minnesota withholding for them.
What are considered supplemental payments?
Minnesota follows federal guidelines for supplemental payments. Some common examples include:
- vacation, accumulated sick leave or overtime pay
- back pay or severance pay
- bonuses, commissions, awards or prizes
- nondeductible moving expenses
For more information and federal withholding guidelines:
How much Minnesota tax should I withhold?
Withholding for supplemental payments varies depending on when you make the payments and how you list them in your payroll records.
Not paid with regular wages
If you make supplemental payments at different times than regular wages or paychecks, multiply the supplemental pay amount by 6.25 percent (.0625) to calculate how much Minnesota tax to withhold.
Paid with regular wages
If you pay regular wages and supplemental payments at the same time, you may list them either separately or together on your payroll records.
If you list the payments separately on payroll records – regardless of how they are listed on employee paychecks – you may use either of the following methods to determine Minnesota withholding:
- Add the regular wages to the supplemental payment (s) to get total pay.
- Calculate how much to withhold from the total using the Minnesota Withholding Tax Tables.
- Calculate how much to withhold from regular wages using the Minnesota Withholding Tax Tables.
- Multiply the supplemental payment(s) by 6.25 percent (.0625) to calculate how much to withhold from the payment(s)..
Note: You must use Method 1 if you do not list regular wages and supplemental payments separately on your payroll records.