Originally published in the Northfield News
As the holiday season comes to a close, Minnesotans are probably not thinking about their 2018 income tax returns. However, as soon as the new year begins, we will be right in the middle of tax season.
Last session, I joined my state legislative colleagues in passing a comprehensive tax conformity bill to align Minnesota’s tax code with the federal government’s latest changes. Unfortunately, due to Governor Dayton’s veto of the bill, Minnesotans will have a more challenging time when filing their state income taxes this year. Until we can pass new tax conformity legislation that makes filing taxes easier on Minnesotans, there are vital pieces of information all filers should know prior to the next tax season.
The Minnesota Department of Revenue is updating its tax filing system to accommodate major differences between Minnesota and federal tax laws. When taxpayers file their 2018 taxes early next year, it is suggested that they file electronically with direct deposit for all possible refunds. Free electronic filing is available for Minnesotans that meet certain eligibility requirements. Also, Minnesotans who file either electronically or by mail can include banking information on their tax return and have their refund deposited directly into their bank accounts.
Minnesota tax filers should also save all receipts and documents that pertain to deductible expenses and charitable contributions. The Minnesota Department of Revenue announced in July that Minnesota income tax filers can claim either the standard deduction or elect to itemize deductions on their 2018 Minnesota income tax returns, regardless of the choice they make on their 2018 federal income tax returns. This is a dramatic change in previous procedures and allows Minnesotans to maximize their tax refunds by reducing their tax liability as much as the law allows.
Further, Minnesotans should make their final estimated payment for 2018. Estimated tax is how you pay tax on income not subject to withholding. Some common examples include: self-employment, pensions, unemployment compensation, interest and dividends, rents, alimony, gains from the sale of assets, and prizes and awards. Minnesotans must pay estimated tax if they expect to owe $500 or more in Minnesota income tax after subtracting withholding and refundable credits. To avoid a penalty, estimated tax payments plus withholding and refundable credits must equal either of the following: 90 percent of an individual’s tax liability for the current year; or 100 percent of an individual’s tax liability for the previous year (110 percent if the adjusted gross income was more than $150,000). Most taxpayers’ final Minnesota estimated payment is due by January 15, 2019. However, this estimated payment does not have to be made if an individual files their Minnesota income tax return and pays the entire amount by January 31, 2019.
Tax conformity and relief will again be a top priority for the legislature in 2019. Minnesotans deserve a less complicated tax filing procedure, and I think we can work across the aisle in the upcoming session to accomplish that and more. It is important to remember, during the last two years, we passed a balanced budget, grew our rainy-day fund to its highest mark in history, and in addition, still have an over $1.5 billion surplus. More money in the pocket books of Minnesota families means a higher quality of life for all, and we will look to craft another budget that funds the priorities of Minnesotans without a tax increase.