Minnesota Unemployment Tax Increase

April 12, 2022 by Jason Kindseth
State and Local Taxation

There is a large payroll tax increase for employers (businesses and non-profits) in Minnesota that hasn’t gotten much attention. The increase is starting to be noticed now that Quarter 1 2022 payroll tax filings are coming due and taxes have to be paid. This increase is in MN Unemployment tax and covid is to blame.

Minnesota Unemployment tax is paid on the first $38,000 (2022) of wages paid to MN workers. The tax rate usually goes from 0.1% up to a maximum of 9% of those wages, but due to a covid related shortfall in the unemployment trust fund there is a 15.8% additional assessment of tax in 2022.

Example: Company A has 5 employees that earn $80,000/year and normally pays MN Unemployment tax at 2% experience rating. In Q1 2022 each employee earned $20,000. The tax would be calculated as $100,000*2%=$2,000 of tax. In 2022 there is additional tax calculated as $2,000*15.8%=$316.

Companies with more employees and higher experience ratings (calculated based on previous unemployment claims) will be impacted the most based on this tax change. There have been efforts to alleviate the increase in tax in the MN legislature, but as of the date of this post the tax remains.