Be careful to report on a timely basis. Minnesota should send copies of reporting forms in advance of the due date. A late or incorrect form can result in heavy penalties or fines. Keep in mind, if you don' t receive your forms, don' t assume that you have no tax liability. You are responsible for getting the forms, filing them, and paying the tax. You can get useful IRS publications, tax forms, and instructions through the Internal Revenue Information Services (IRIS) via a government bulletin board called FedWorld. You can access IRIS directly via telephone or via the Internet.
Property Tax
Property taxes are assessed to pay the operating expenses of your locality, pay for bonds, and provide for special projects at the county and community level. Taxes are usually paid on an annual basis to the county treasurer. In most cases the county tax assessor will automatically bill you as the owner of record, so you will not need to contact this office when purchasing property for your business.
In general, Minnesota' s state and local governments do not tax personal property. This includes all of the items you purchase to conduct your business such as commercial and industrial goods, farm machinery and livestock, as well as your personal or household goods. Real property (land and buildings), however, is taxed. For specific questions on property taxes, contact the Minnesota Department of Revenue. For real property questions you can contact your local tax assessor.
Withholding Taxes
When your business has employees, you must withhold federal income tax from their wages. In addition, you must contribute to Social Security, Medicare, and unemployment funds.
Federal Unemployment Taxes (FUTA)
Unemployment benefits are paid from state unemployment taxes and unemployment insurance. The cost of administering the unemployment program is paid from Federal Unemployment Tax Act (FUTA) funds.
The federal unemployment tax is your company' s contribution to the unemployment insurance fund. You are required to pay 6.2% on the first $7,000 of each employee' s annual pay. The actual rate you pay is normally 0.8% because you receive a 5.4% credit for the state unemployment taxes you pay.
You will be required to pay FUTA if you employ one or more persons (not farm or household workers) for at least one day in each of 20 calendar weeks (not necessarily consecutive) and if you pay wages of $1,500 or more during the year. You may be required to pay federal unemployment tax even if you are exempt from paying state taxes. If your FUTA liability is more than $100 in any quarter, you are required to make a federal tax deposit for the amount owing.
FUTA tax is reported annually on Form 940, Employer' s Annual Federal Unemployment Tax Return, which is due by January 31 of the next calendar year. If you have made timely deposits, however, you have until February 10 to file. In addition, if at the end of any calendar quarter you owe more than $100 FUTA tax for the year, you must make a deposit by the end of the next month. Some employers can qualify to file a simplified FUTA return. To be eligible to file Form 940-EZ, you must:
- Pay unemployment tax to only one state;
- Pay state unemployment taxes by the due date on Form 940-EZ; and
- Have wages that are subject to FUTA and are also taxable for state unemployment tax purposes.
To find out more about this simplified filing, get the following publications:
- Publication #334, Tax Guide for Small Business
- Publication #15, Circular E, Employer' s Tax Guide
- Publication #509, Tax Calendar and Checklist
State Unemployment Taxes
As an employer in Minnesota, you are responsible for paying unemployment tax at the state level if you have employees or intend to hire employees.
Although the tax is on your employees' covered wages, you are not allowed to deduct this tax from their wages. The burden of paying the state unemployment tax lies on your shoulders as the employer. The amount of tax you will be liable for depends on what type and how many employees you have, and your payroll totals.
If you operate as a sole proprietor or partner, you will not be required to pay unemployment tax because you will not be considered an actual employee of your business. Also, in Minnesota your sole proprietorship is exempt from paying state unemployment tax on your spouse, parent, or children under 18 years of age if they are employees of your business. However, if you fire them or lay them off they will not be eligible to collect unemployment benefits.
To register to pay unemployment tax in Minnesota, you will need to file Form MDES-13, Report to Determine Liability for Unemployment Tax with the Minnesota Department of Economic Security. The department offers the handbook MDES-130, Unemployment Insurance Information for Employers, to help you better understand the filing process
