If you make supplemental payments to employees, you must withhold Minnesota income tax on regular wages.
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 on federal withholding guidelines:
How much Minnesota tax should I withhold?
There are different ways to calculate the withholding, 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 in payroll records – regardless of how they are listed on employee paychecks – you may use either of the following methods to determine Minnesota withholding:
Note: You must use Method 1 if you do not list regular wages and supplemental payments separately in your payroll records.