Last week, Governor Tim Walz and legislative leaders announced the new state budget would include tax exemptions for unemployment benefits and PPP loans. Minnesota will now conform with the federal government on both areas. For unemployment benefits, this means that the first $10,200 received per taxpayer will not be taxable. All forgiven PPP loans will also be tax-free.
These are both departures from how the state has treated these items until this point. This will apply retroactively to returns already filed for 2020. Given the large number of returns already filed, the Minnesota Department of Revenue is asking that you do not immediately seek to file an amended return. Since amended returns need to be filed by paper and not electronically, they continue to take a substantial time to be processed.
Lawmakers are expected to return for an overtime session in mid-June to finish ratifying the budget. Once it has become law, the Department of Revenue will evaluate options. Their hope is to be able to make these adjustments automatically and eliminate the need to file amended returns. Taxpayers would then receive a notice in the mail that their return has been adjusted and a refund will be issued in the same manner as the original return.
At Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR), we stay on top of the ever-changing tax laws so that you don’t have to. We will continue to monitor these changes for Minnesota to ensure clients that have already filed are adjusted accordingly. If you are concerned about how these changes will impact your taxes, call our team today to schedule a consultation with one of our accountants.
