Minnesota Withholding Tax Nonpayment Emergency
Checklist
What This Issue Means
Minnesota withholding tax nonpayment occurs when an employer fails to deposit Minnesota state income tax withheld from employee wages to the Minnesota Department of Revenue by the required deadline. This is different from federal employment taxes, such as Social Security and Medicare taxes, which are paid to the Internal Revenue Service. Minnesota withholding tax is considered a trust fund because it represents money collected from employees that belongs to the state, not the business.
Why the State Issues This Notice
The Minnesota Department of Revenue requires employers to deposit withholding tax on specific schedules based on the amount withheld and federal deposit requirements. The state matches payment records against filed returns to identify missing deposits. When the department detects that reported taxes have not been received, it generates a nonpayment notice as part of standard administrative procedures to ensure compliance and protect employee withholdings.
What Happens If This Is Ignored
Failing to pay withholding tax results in escalating collection actions by the Minnesota
Department of Revenue. The state adds interest and penalties to the unpaid balance, which continues to grow over time as delinquent taxes. Collection efforts may include filing tax liens against business or personal property in counties such as Hennepin or Ramsey, issuing wage levies, or pursuing bank account garnishments. The longer unpaid taxes remain unresolved, the more aggressive the enforcement actions become.
Step-by-Step Checklist
Step 1: Gather All Nonpayment Notices
Collect all notices from the Minnesota Department of Revenue related to unpaid withholding tax, and organize them by tax period and date received. If you cannot locate original notices, contact the Collections Division in Saint Paul at 651-556-3003 or 800-657-3909 to request copies and verify your current account status.
Step 2: Verify the Amounts Owed
Review each notice carefully to confirm the tax period, amount owed, and any interest and penalties listed on the assessment. Compare the amounts shown against your payroll records,
Form W-2 filings, and filed withholding tax returns to identify any discrepancies. Document any errors you find with supporting records for your discussions with the Collections Division.
Step 3: Confirm Your Deposit Schedule
Determine which deposit schedule applies to your business based on Minnesota law: quarterly for less than $1,500 withheld in the previous quarter, monthly for more than $1,500 withheld, or annual for less than $500 withheld before December. Your deposit schedule depends on both federal requirements and Minnesota withholding amounts for proper payroll tax payments.
Step 4: Collect Payment Documentation
Gather all proof of deposits, including bank statements, direct deposit confirmations, and cancelled checks showing when payments were submitted to the Minnesota Department of
Revenue. Organize this documentation by tax period and payment date. If you made deposits that were not credited to your account, this documentation will be essential to resolving the discrepancy.
Step 5: Contact the Collections Division
Reach out to the Minnesota Department of Revenue Collections Division at 651-556-3003,
800-657-3909, or mdor.collection@state.mn.us to discuss your account status and available resolution options. Request written confirmation of your current balance, including all interest and penalties. Ask whether any liens have been filed and what payment arrangements might be available through a periodic payment plan.
Step 6: Assess Your Ability to Pay
Evaluate whether you can pay the full amount owed immediately or if you need to request a payment plan from the department. Calculate what the monthly payment amount would be that is feasible for your business's cash flow if full payment is not possible. Be prepared to provide financing support for payment plan requests, including eligibility or potential eligibility under
Minnesota law.
Step 7: Submit Written Correspondence
Send written communication to the Collections Division at Minnesota Revenue Collection
Division, P.O. Box 64564, Saint Paul, MN 55164-0564, acknowledging the nonpayment and requesting information about resolution options. Include your business name, account number, or Taxpayer Identification Number, and the specific tax periods involved in your correspondence.
Step 8: Maintain Complete Records
Keep copies of all written communications with the Minnesota Department of Revenue, including letters, emails, and payment confirmations sent or received. Document all phone calls with dates, times, and names of department representatives you spoke with. This
record-keeping protects you if disputes arise later over what was communicated or agreed upon.
- Ignoring collection notices from the state: Failing to respond to Minnesota
- Confusing federal and state tax obligations: Mixing Minnesota withholding tax with
- Missing periodic payment plan deadlines: Defaulting on even one payment under an
- Not providing complete tax documentation: Submitting incomplete information or
- State tax notice review and response
- Penalty and interest reduction options
- Payroll and trust fund tax assistance
- Payment plan and relief eligibility review
- Representation with state tax agencies
Step 9: Stay Current on Future Obligations
Ensure all current Minnesota withholding tax deposits are made on time, per your required schedule, to prevent additional nonpayment issues. Continue filing all required quarterly or annual withholding tax returns, even while resolving past debt. Falling behind on current obligations while addressing old debt significantly complicates resolution efforts and may disqualify you from payment arrangements.
Understanding Related Tax Obligations
Minnesota law requires employers to withhold state income tax from employee wages and remit these amounts to the Minnesota Department of Revenue. These obligations are separate from federal employment taxes and other Minnesota taxes, such as Sales and Use Tax, Individual
Income Tax, or Business Income Taxes. Employers must also understand their responsibilities for issuing Form W-2 to employees and filing information returns with both state and federal agencies.
Common Mistakes to Avoid
Department of Revenue notices does not make the debt disappear and typically results in liens, levies, or other aggressive enforcement actions against your business. The department will escalate collection efforts when taxpayers do not communicate about outstanding balances or establish payment arrangements. federal payroll taxes, such as Social Security and Medicare, creates confusion about which agency to contact for resolution. Minnesota withholding tax goes only to the
Minnesota Department of Revenue, while federal employment taxes are paid to the
Internal Revenue Service. approved payment arrangement can result in the plan being cancelled and immediate collection action resuming against your accounts. Once a stabilization plan is established, strict compliance with all payment deadlines is essential for maintaining the agreement. incorrect account numbers delays resolution and may result in additional interest and penalties accruing during the delay period. Always include your Taxpayer Identification
Number and all relevant tax periods in every piece of correspondence with the
Collections Division.
Additional Resources and Assistance
The Minnesota Department of Revenue offers assistance for taxpayers who need help resolving unpaid taxes and understanding their obligations under Minnesota law. The Minnesota State
Relay Service is available for individuals who are deaf or hard of hearing at 711 or
1-800-627-3529. Business owners and nonprofit organization representatives should maintain direct contact with the Collections Division to discuss available options that accommodate their financial circumstances and cash flow challenges.
Received a State Tax Notice?
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