Expert: Shirley McAllister, CPP, PHR - 12/12/2008

Question
Construction Company,  Located in Minnesota.  Does Work in North Dakota, Minnesota and surrounding states. Employees live in Minnesota and North Dakota.
One individual moved from Minnesota to North Dakota in September.  Do I withhold North Dakota State Taxes and North Dakota Unemployment taxes from Payroll as of September 1st?  Have withheld Minnesota Taxes until this point.  Also Minnesota State Unemployment taxes are considerably higher than North Dakota so Employee wants to continue to Draw from Minnesota.  What is the answer please

Answer
The withholding is for the state where the work is performed. There are some Reciprocal agreements listed below which help with double withholding.

Minnesota has reciprocal income tax agreements with Michigan, North Dakota and Wisconsin.

Residents of Michigan, North Dakota, and Wisconsin are exempted from Minnesota withholding. A reciprocity Exemption from Minnesota Withholding, Affidavit of Residency is required to certify residency.

(this means that the employee moving to North Dakota would not have to have Minnesota withheld but would have to have North Dakota withheld.)

Residents of Minnesota and Montana working in North Dakota are not required to have North Dakota tax withheld. An Affidavit of Residency should be filed with their employer annually.

Illinois, Indiana, Kentucky, Michigan and Minnesota residents working within Wisconsin must provide a written statement to their employer certifying the place of residence in order for the employer to not withhold Wisconsin income tax. Minnesota residents are required to fill out the Statement of Minnesota residency annually. Others must fill out Nonresident Employee's Withholding Reciprocity Declaration

Shirley

Shirley