This is the eleventh post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.  

When the MDEED receives an application from a former employee for unemployment benefits, the former employer(s) will receive a Determination of Benefit Account, which indicates:

1. The applicant’s weekly and maximum benefit amounts;
2. Wages used to establish the account; and,
3. The maximum potential charges to the employer(s)’ experience rating.

The wages paid during the “base period” determine the former employee’s weekly and maximum amount of unemployment benefits. The “base period” is the first four of the last five completed calendar quarters prior to the effective date of the former employee’s application for benefits.

Except as provided in Minnesota Statutes Section §268.047, if the former employee had more than one employer during the base period, the benefits are charged to each employer using the same ratio the employers paid the former employee. For example, if one employer pays an employee $1,000 during the base period and another employer pays the same former employee $3,000 during the base period, the benefits charges will be allocated 25% and 75%, respectively.

An employer must keep records for at least eight years. The MDEED can audit a company at any reasonable time and as often as necessary. Employer’s should retain the following information:

• For all employees and former employees:
  • First and last name;
  • Social Security number;
  • Location where services were performed;
  • Rate of pay;
  • Actual days and number of hours worked; and,
  • Gross earnings and the amount paid.
•  Payroll records:
  • Payroll register;
  • Individual earnings records; and,
  • Time cards.
• Federal Records:
  • Forms W-2 and W-3;
  • Forms 940 and 941;
  • Forms 1096 and 1099; and,
  • Federal income tax returns.
• General Accounting:
  • Chart of accounts; and,
  • Detailed general ledger.

This is the tenth post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.

All wages paid to the officer or shareholder of an S corporation are covered wages for SUTA tax purposes. Some payments, however, are not covered wages, including:

1. All pro rata dividends and earnings distributed by the corporation;
2. Expense reimbursements;
3. Loans to officers and shareholders;
4. Corporate repayment of loans or interest to officers and shareholders; and,
5. Rental payments on property personally owned by an officer or shareholder.

An agricultural employer is exempt from paying SUTA tax unless one of the following conditions is met:

1. The employer pays 10 or more employees for at least 20 weeks during a single calendar year;
2. The employer pays $20,000 or more to employees during a calendar quarter;
3. The employer pays 4 employees for at least 20 weeks, excluding family members, farm officers, and workers 16 years of age and under; or,
4. The employer pays $20,000 or more in cash or non-cash wages, excluding “family farm” officers as defined in Minnesota Statutes Section 500.24, and workers 16 and under.

Service performed by an officer or shareholder of a “family farm corporation,” as defined in Minnesota Statutes Section 500.24, is excluded from agricultural labor and employment unless the agricultural operation must pay FUTA tax.

Employers must pay SUTA tax on all covered wages of any household employee if the employer pays covered wages of more than $1,000 in any calendar quarter.

This is the ninth post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.  

Covered employment is when an employee performs services for an employer in return for covered wages. Employers pay SUTA tax on “covered” wages. “Covered” wages include most payments to employees. Some exceptions include:

1. Employer payments for retirement, medical, and hospitalization expenses, and death, if the payments are made under a plan or system for employees generally;
2. Sick pay for periods of sickness or injury after the end of six calendar months after the calendar month in which the employee last worked;
3. Sick pay paid by a third party, such as an insurance company, or disability payments made under a workers’ compensation law;
4. Employer paid sickness or accident disability insurance if the employer provides coverage for employees generally;
5. Employer provided legal or dental services plans if the employer provides coverage for employees generally;
6. Allowances to employees for reimbursement of meal expenses when employees are required to perform work after regular hours; and,
7. Amounts paid specifically as advances or reimbursements for traveling or other bona fide ordinary and necessary business expenses.

Some employers are not required to pay SUTA tax on certain wages paid, called non-covered employment. Non-covered employment includes:

1. Services performed by a sole proprietor or member of a partnership or services performed for a sole proprietor by his or her parent, spouse, or child under the age of 18;
2. Services performed on or after January 1, 2005, for a corporation by an officer who owns 25 percent or more of the corporation;
3. Services performed for an LLC by a member who owns 25 percent or more of the LLC;
4. Services performed for a church, convention or association of churches, or any other supervised religious organization, controlled or principally supported by a church, if the employer is operated primarily for religious purposes.

An employer that is not required to pay for unemployment insurance coverage on may elect to voluntarily pay for coverage. This election remains in effect for a minimum of two years.

This is the eighth post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.

For the first 48 months of paying wages, the MDEED will assign the new employer a tax rate. The new employer rate will either be an average of the tax rate for all employers in Minnesota, or, if the employer is in a high tax rate industry, the MDEED assigns the new employer the average tax rate for all employers in the high tax rate industry.

After paying SUTA tax for 48 months, each employer is assigned an experience rating, which is an individual tax rate for that specific employer. The experience rating, or tax rate, is based on the employer’s unemployment insurance claim history. An employer’s experience rating will usually fluctuate from year to year. The MDEED notifies employers in December of their employer’s experience rating for the next calendar year.

Any employer that has been assigned an experience rating can buy-down its experience rating. The buy-down payment must be made within 120 days from the beginning of the calendar year for which the tax rate is effective and will include a surcharge of 25%. The MDEED’s website has a forecast tax calculator and process tax rate buy-down program for determining whether a buy-down is cost effective.

This is the seventh post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.

The Minnesota Unemployment Insurance Tax, often referred to as SUTA tax, provides funds for paying unemployment compensation to workers who have lost their jobs. SUTA tax is collected from the employer. The Minnesota Unemployment Insurance Program is administered by the Minnesota Department of Employment and Economic Developent (MDEED). All employers that pay “covered” wages in Minnesota must register with the Minnesota Unemployment Insurance Program prior to the due date of the first quarterly wage detail report the employer is required to submit.

The taxable wage base is 60 percent of the average annual wages paid in Minnesota and varies from year to year. SUTA tax is paid on only the gross wages paid to each employee up to the taxable wage base for that year.

Employers are required to submit a wage detail report electronically before the last day of the month following the end of the calendar quarter. Employers with 50 employees or less must submit a SUTA tax payment electronically. All payments must be received by the last day of the month following the end of the calendar quarter.

Employers that fail to submit a quarterly wage detail report on the due date must pay a one-time fee of $10 per employee, calculated based on the highest of: the number of employees on the last wage detail report; the number of employees reported in the corresponding quarter of the prior year; or, if no report was ever submitted, the number of employees reported at the time of registration. The late fee may not be less than $250.

In the case where a quarterly wage detail report is submitted with incorrect information, the employer must pay a fee of $25 for each employee for whom the information is incorrect.