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Last Updated: 1/4/2013

What's New for Employers for Tax Year 2011?

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Federal Update Legislation

Minnesota has adopted all of the changes to the Internal Revenue Code (IRC) enacted between March 18, 2010, and April 14, 2011, effective the same date as the federal changes.

As a result:

  • The value of health insurance benefits provided to employees' nondependent children younger than age 27 is also exempt for Minnesota tax purposes. (While legislation signed into law in April 2011 conformed Minnesota treatment of these benefits to federal law for 2010 only, this new law covers any benefits provided in 2011 and all future years.)

  • The maximum exclusion for employer-provided adoption assistance is the same for both federal and Minnesota tax purposes.

  • The exclusion from income of an employee for amounts paid or expenses incurred (up to $5,250 annually) by the employer under an educational assistance program is extended through 2011 and 2012.

  • For benefits paid in 2011, employers can provide the same amount of tax-free fringe benefit to their employees for qualified transportation fringe benefits that the employer provides through transit passes and vanpooling as the employer provides to employees as a tax-free parking benefit.

Third-Party Payers of Sick Leave

Certain third-party payers of sick pay are required to file an annual report with the department. The report must include the names and identification numbers of the employees who received sick pay and the amount of sick pay paid and the tax withheld. The report is due by March 1 of the year following the year that the sick pay is paid. 

The requirement only applies to third-party payers who withhold income tax and remit it to the department under the third-party's withholding tax account, but then permits the employer to include the taxes withheld at the end of the year on the W-2 issued by the employer to the employee. Effective for benefits paid after Dec. 31, 2010.

Note: Changes for Future Years

Beginning with tax year 2012, law changes related to the Nonresident Entertainer Tax include:

  • requires entertainment promoters to withhold 2 percent on the amounts above $600 that the promoter pays the nonresident entertainer in a year, which is the same as the federal requirement for this kind of income;
  • repeals the $120 nonrefundable credit allowed to nonresident entertainers; and
  • allows nonresident entertainers whose total compensation received from performances in Minnesota is less than the individual income tax filing requirements to be exempt from tax.

Continue to check this web page for updates.