July 14, 2010 – Guidance From The Minnesota Department Of Revenue Regarding Adult Children
As we previously reported (https://www.hitesmanlaw.com/news_events/alert_100527.shtml), Minnesota tax law was not amended to incorporate the change to federal tax law providing an exclusion from income for group health plan coverage to certain adult children. Accordingly, for purposes of Minnesota income taxes, coverage provided to adult children who are not tax dependents under the old federal rules is taxable to the employee.
The Minnesota Department of Revenue has posted a notice on its website discussing an employer’s obligation with respect to these adult children under Minnesota tax law. The notice is available at: http://taxes.state.mn.us/taxes/withholding/
other_supporting_content/whats_new_employers_10.shtml.
The notice indicates that although the coverage provided to an adult child (who is not a tax dependent under the prior federal rules) is taxable income for purposes of Minnesota income tax and constitutes wages for purposes of the rules with income tax withholding, employers will not, for the time being, be required to withhold Minnesota income taxes on this income.
Please contact us if you have any questions regarding this guidance.