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Dave Benusa

Some Clarity to the Recent Minnesota Tax Increases

Yesterday, we sat in on a conference call with the commissioner of revenue and others at the Minnesota Department of Revenue.  Some interesting items to note from the discussion on the recent Minnesota tax increases:

  • Withholding tables have been updated and should be used starting July 1, 2013.
    • However, this will not catch-up individuals for the first half of the year.  The withholding will only cover income from July 1 to December 31, 2013.
  • Composite and nonresident withholding rates for 2013 will increase to 9.85% for pass-through entities.
  • As of right now, a federal extension on a gift tax return will not be accepted.
  • Separate extension forms will need to be filed for gift tax returns that are originally due April 15, 2014 and forward.  (MN expects a technical correction to be made).
  • Three-year lookback for gifts; an individual who dies beginning on January 1, 2013 will need to look back to the prior three years to determine whether they have a MN filing requirement.
    • However, only taxable gifts made after June 30, 2013 will be included in the MN taxable estate for the three-year lookback.
    • You may have a taxable estate for MN under $1M, but will still have a filing requirement if the prior three years of gifts trip them over the $1M filing threshold
  • Qualified small business property exemptions used in MN for estates, a form needs to be filed after the second year and third year anniversary of the decedents death to inform MN that the heir’s still qualify for the exemption and meet all of the rules.
    • If the requirements are not met (qualified heir must retain ownership or transfer to family member and the heir needs to materially participate in the business), recapture taxes will be due.
  • Transit benefits under IRC Section 127 are no longer allowed for MN purposes.
  • MN political campaign contribution refund has been reinstated.
    • This is for campaign contributions made from 7/1/13 to 12/31/13.  The maximum refund is $50/ per person and $100/ per couple.

Please contact our office at 952.979.3100 with any questions you have related to the Minnesota tax increases and how they may affect you or your business.

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