Forms and zero returns Deposits are made using EFTPS (federal) and e‑Services or payment vouchers (Minnesota). Quarterly and annual returns must be filed even if all tax has already been deposited or no tax is due —a zero return is still required. Penalties and interest – withholding tax Both the IRS and the Minnesota Department of Revenue can assess penalties and interest for: • Failing to make deposits on time • Failing to file required returns on time • Failing to file or correctly complete Forms W‑2 and 1099 Federal penalties also apply for incorrect taxpayer identification numbers and incorrect or missing W‑2 information. Minnesota may impose additional penalties for failing to submit required W‑2 information or failing to provide all required data. Individuals responsible for collecting and paying employment taxes can be held personally liable for unpaid amounts. The IRS may assess a Trust Fund Recovery Penalty equal to 100 percent of withheld income tax and employee FICA not paid over. Interest is charged on unpaid withholding tax (and penalties) from the due date until payment is made, at rates adjusted periodically to reflect market conditions. Contractor and subcontractor clearance For projects done for the State of Minnesota or any of its political subdivisions (cities, counties, school districts, etc.), prime contractors and subcontractors must file a Contractor Affidavit (Form IC‑134) with the Department of Revenue to certify they are in compliance with Minnesota withholding tax laws before receiving final payment . • A contractor i s a person or business awarded a contract to perform work. • A prime contractor is the main contractor on a project who may subcontract parts of the work. • A subcontractor is hired by the prime contractor to perform part of the work. Subcontractors file a contractor affidavit when their portion of the work is complete; prime contractors file when the entire project is finished. Contractors submit the affidavit electronically through the Department of Revenue’s Contractor Affidavit system as described at Contractor Affidavit Requirements.
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