Ask Reggi Your Question Now

Reggi is the free generative AI assistance for regulatory compliance
Ask a Question

Can I hire employees as independent contractors to save money on taxes in Minnesota? What are the requirements?

In Minnesota, hiring employees as independent contractors to save money on taxes is not recommended as it may result in penalties and legal consequences. The Minnesota Department of Revenue has specific requirements for filing taxes withheld from wages, compensation of entertainers, and payments to out-of-state contractors [1.1].

Requirements for Filing Taxes Withheld from Wages, Compensation of Entertainers, and Payments to Out-of-State Contractors

According to MNST 289A.09, an employer who is required to deduct and withhold tax under section 290.92, subdivision 2a or 3, and a person required to deduct and withhold tax under section 290.923, subdivision 2, must file a return with the commissioner for each quarterly period unless otherwise prescribed by the commissioner. A person or corporation required to make deposits under section 290.9201, subdivision 8, must file an entertainer withholding tax return with the commissioner. A person required to withhold an amount under section 290.9705, subdivision 1, must file a return. A partnership required to deduct and withhold tax under section 290.92, subdivision 4b, must file a return. An S corporation required to deduct and withhold tax under section 290.92, subdivision 4c, must also file a return [1.1].

Requirements for Filing Individual Income, Fiduciary Income, Corporate Franchise, Mining Company, and Entertainment Taxes

According to MNST 289A.08, a taxpayer must file a return for each taxable year the taxpayer is required to file a return under section 6012 of the Internal Revenue Code or meets the requirements under paragraph (d) to file a return. The decedent’s final income tax return, and other income tax returns for prior years where the decedent had gross income in excess of the minimum amount at which an individual is required to file and did not file, must be filed by the decedent’s personal representative, if any. If there is no personal representative, the return or returns must be filed by the transferees, as defined in section 270C.58, subdivision 3, who receive property of the decedent. A corporation that is subject to the state’s jurisdiction to tax under section 290.014, subdivision 5, must file a return. An exempt organization that is subject to tax on unrelated business income under section 290.05, subdivision 3, must file a return for each taxable year in which the organization is required to file a return under section 6012 of the Internal Revenue Code because of the receipt of unrelated business income [1.2].

Conclusion

Based on the requirements for filing taxes in Minnesota, it is not recommended to hire employees as independent contractors to save money on taxes. It is important to follow the guidelines set by the Minnesota Department of Revenue to avoid penalties and legal consequences.

Source(s):
Jurisdiction

Minnesota