INCOME TAX WITHHOLDING
INTRODUCTION Employers must withhold federal and Minnesota income tax and the employee’s share of the FICA tax from their employee’s wages and pay those taxes to the federal and state government. The amount of withholding is based on the wages or salary paid to the employee, and the number of withholding allowances claimed by the employee on Form W-4MN, Minnesota Withholding Allowance/Exemption Certificate, or the amount determined on Form W-4, Employee's Withholding Certificate which the employee completes at the time of hiring. (Withholding Allowance Certificates are discussed later in this section.) Employers are required to withhold both federal and state income taxes and FICA tax from their employees’ wages as soon as they are paid. Note that special rules may apply to the withholding of taxes on “supplemental” wages (e.g., on a bonus paid to an employee). The Internal Revenue Service and the Minnesota Department of Revenue provide withholding tables to enable the employer to determine the appropriate withholding amount. These tables are available on the agencies websites. These agencies also send periodic newsletters and/or notices to employers about changes in the law or procedures. Employers must comply with these changes. TAX IDENTIFICATION NUMBER All business entities that have employees must obtain a federal employer identification number. If the employer employs anyone who works in Minnesota, or any Minnesota resident, that employer must also obtain a Minnesota tax identification number. Employers should apply for their tax identification numbers before they expect to hire their first employee, to allow for adequate processing time. A penalty may be assessed for failure to apply on time. A federal identification number is obtained from the Internal Revenue Service online. Information is available at How to Apply for an EIN. To register for a Minnesota Tax ID Number go to Registering Your Business. If you do not have Internet access, call the Business Registration office at 651-282-5225 or 800-657-3605. Further information on the procedure for obtaining these numbers is provided in the section of this Guide on Business Taxes or may be obtained from the Internal Revenue Service or Minnesota Department of Revenue at the address and telephone numbers provided in the Resource Directory section of this Guide. Following receipt and processing of the applications for tax identification numbers, the Internal Revenue Service and the Minnesota Department of Revenue provides the employer with respective identification numbers. Employers must file Minnesota withholding tax returns electronically over the Internet using e-services. If the employer is not required to pay electronically and chooses to pay by check, they can create a payment voucher found on the Minnesota Department of Revenue website for federal payments, the employer will automatically be enrolled in the Electronic Federal Tax Payment System—EFTPS—so they can make all deposits online or by phone. Within a few days they will receive by mail an EFTPS enrollment confirmation, as well as a Personal Identification Number
234
Made with FlippingBook - Online Brochure Maker