Severance pay may be taxable to Minnesota and subject to state withholding.
When are severance payments allocated to Minnesota?
It depends on where the employee provided their services and if they are a Minnesota resident when receiving the payment.
If, at time of the severance payment, the employee is a:
- Minnesota resident: The full payment is allocated to Minnesota.
- Nonresident of Minnesota: The payment is allocated to Minnesota based on the percentage of time the employee worked in Minnesota. For example, if the nonresident employee worked for nine years in Minnesota and one year in Florida, 90 percent of their severance pay is allocated to Minnesota.