Minnesota payroll setup for your first hire

Minnesota takes state income tax from paychecks. Those amounts sit with the Department of Revenue, not the Unemployment Insurance Program.

Minnesota takes state income tax from paychecks. This is not Texas, Florida, Washington, or Tennessee. Those states do not take state income tax from paychecks. A federal Employee’s Withholding Certificate (Form W-4) is not the Minnesota certificate.

The Minnesota Department of Revenue is the income-tax office. The New Employer Guide says the Minnesota Tax ID Number is a seven-digit number. Apply for that number and open a withholding tax account before you take tax from wages. The Department of Revenue can assess a $100 penalty if you do not. Register online at Register for a Tax ID Number, or file the Application for Business Registration (Form ABR). File and pay on e-Services, the Department of Revenue e-services portal. Hold that seven-digit number. An unemployment login is not that number. A payroll login is not either account.

Employees complete Form W-4MN, the Minnesota Employee Withholding Certificate. The Department of Revenue W-4MN page says every employee who completes a federal W-4 must also complete Form W-4MN. If the employee does not give you Form W-4MN before the first wage payment, withhold as if the employee is single with zero allowances. Send a copy to the Department of Revenue when the employee claims more than 10 allowances, claims to be exempt and you reasonably expect wages over $200 a week, or you believe the allowances are wrong. The Department of Revenue can assess a $50 penalty for each required Form W-4MN you do not send.

Minnesota has income-tax reciprocity with Michigan and North Dakota. The New Employer Guide says a Michigan or North Dakota resident who gives you a completed Form MWR, Reciprocity Exemption/Affidavit of Residency, does not need Minnesota withholding. You still send that Form MWR to the Department of Revenue. This is not Maryland’s county or Baltimore City tax. Minnesota does not add a county income tax on the same withholding file.

The 2026 Minnesota Withholding Tax Instructions say most shops file a withholding tax return each quarter on e-Services. Quarterly deposits follow the federal deposit schedule. Monthly deposits are due by the 15th day of the next month. Annual filing is for shops that withheld $500 or less in the prior year. An annual return is due January 31. You must file even in a zero-wage quarter until the Department of Revenue closes the file. The withholding number still sits with the Department of Revenue. The unemployment number still sits with the Unemployment Insurance Program.

When you owe unemployment: after the first covered wages, not a $1,500 quarter test

DEED is the Department of Employment and Economic Development. The Minnesota Unemployment Insurance Program sits with DEED. That tax is often called SUTA, state unemployment tax, or SUI, state unemployment insurance. The Program’s new-employer page restates Minnesota Unemployment Insurance Law. Every individual or organization that pays covered wages in Minnesota must register. Register as soon as possible after the first wages are paid for covered employment in Minnesota. Register before the due date of the first quarterly wage detail report. Do not register until covered wages have actually been paid. Minnesota Statutes § 268.042 says each employer must register upon or before that first wage detail report. Minnesota Statutes § 268.035 says an employer is a person that has had one or more employees during the current or the prior calendar year. Agricultural, domestic, and nonprofit shops use other tests. Corporate officers and limited-liability-company members who own 25 percent or more can be noncovered unless they elect coverage. This scorecard is the regular-business path.

This is not California’s $100-in-a-quarter test. There is no 15-day California clock on the Program page. Do not copy that clock onto Minnesota. This is not Missouri’s $1,500-in-a-quarter or 20-week test. Do not copy that test onto Minnesota. This is not Indiana’s $1 covered-wage test. Do not copy that $1 test onto Minnesota. This is not Maryland’s one-worker clock from the first day of business. Maryland also tells shops to file a Combined Registration Application within 20 days of opening. Minnesota does not use that 20-day Combined Registration Application. Minnesota does take state paycheck withholding. Do not treat Minnesota like a no-withholding state.

The Program assigns a Minnesota Unemployment Insurance Employer Account. Gusto’s help article calls that number an Employer Account Number (EAN). Gusto says a current EAN starts with 0 and has seven digits. Hold the number on your Tax Rate Determination. Do not substitute a federal Employer Identification Number, called FEIN. Do not substitute the Department of Revenue Tax ID.

Register unemployment on ui.mn.gov. Do not open the file until covered wages have been paid.

The Employer Self-Service System is the Minnesota Unemployment Insurance Program’s online system, at ui.mn.gov. The Program’s registration guide says a new shop selects Employers & Agents, then Register for an Account. You will need the FEIN, the Minnesota Department of Revenue Taxpayer ID Number, the legal name, the date covered employees first performed services in Minnesota, and the date first wages were paid. After registration, a temporary User ID cannot pay the account. The Program mails a permanent User ID. A Paid Leave Administrator also needs that permanent ID.

After the account exists, file the quarterly wage detail report on ui.mn.gov. The Program’s wage-detail page says every shop with an active account must send that report even when no covered wages were paid. Reports are due the last day of the month after the quarter. A quarterly wage report is not the new-hire report.

The Program’s tax-rate page prints the 2026 taxable wage base as the first $44,000 of wages a worker earns from that employer in the calendar year. New shops that have paid wages for two years or less get an industry average, not a single statewide percentage. Minnesota Statutes § 268.051 says that new-employer rate may not be less than one percent. Construction shops use a five-digit North American Industry Classification System, called NAICS, code. Other shops use the first two digits. The 2026 base tax rate is 0.40%. An additional assessment of 14.00% sits on top of the computed tax. Use the rate on your Tax Rate Determination, not a number from a software page.

Paid Leave premiums start in 2026 on the same ui.mn.gov account. This is not Maryland’s 2027 start.

Paid Leave is Minnesota’s paid family and medical leave program. Vendor pages also call it Paid Family and Medical Leave, or PFML. The Paid Leave premium page prints a 2026 and 2027 rate of 0.88%. That rate covers Family Leave at 0.27% and Medical Leave at 0.61%. Employers may collect up to 0.44% from employees. Small shops with 30 or fewer employees and an average wage under 150% of the statewide average pay a reduced 0.66% rate. The Program’s due-date page says Paid Leave premium payments begin in 2026. First premium payments are due April 30, 2026. UI taxes and Paid Leave premiums must be paid separately on the Joint Unemployment Insurance – Paid Leave Employer System. This is not Maryland Family and Medical Leave Insurance. Maryland’s FAMLI deductions start in January 2027. This is not Massachusetts Paid Family and Medical Leave. That program already withholds on a first hire. Minnesota Paid Leave rides ui.mn.gov. Do not copy a later-year start onto a Minnesota first hire.

New hire is a 20-day Minnesota New Hire Reporting Center report. A ui.mn.gov wage report does not take it.

The new-hire report is a list of who you just hired. It is not a box on the quarterly wage detail report. The Minnesota New Hire Reporting Center requires a report of a newly hired or rehired employee within 20 days. File at mn-newhire.com. Minnesota Statutes § 142A.29 sets that 20-calendar-day clock from the date of hiring. The New Employer Guide still points that report to the Department of Human Services. The live statute names the commissioner of children, youth, and families. The filing door is the Minnesota New Hire Reporting Center either way. A quarterly ui.mn.gov wage report does not satisfy that clock. This is not Massachusetts’s 14-day Department of Revenue report. This is not Georgia’s 10-day report.

The statute also skips a person who will work less than two months and will have gross earnings less than $250 a month. Rehires after a 60-day gap go back on the 20-day clock. Electronic shops that report twice a month keep those files no fewer than 12 days and no more than 16 days apart. The payroll service can send the file. The clock still sits on you.

Workplace injury insurance is due when the first employee starts. The Department of Labor and Industry does not sell the policy.

This is a first-hire policy for ordinary shops. It is not Florida’s four-employee wait. It is not Tennessee’s five-employee wait. It is not Missouri’s five-employee wait. It is not the three-employee test used in Georgia, North Carolina, or Virginia. It is not Texas optional coverage. It is not Washington’s exclusive state fund. It is not Ohio’s Bureau of Workers’ Compensation monopoly. Minnesota calls this workers’ compensation.

Minnesota Statutes § 176.181 says each employer must buy insurance or get Department of Commerce approval to self-insure. The Department of Labor and Industry coverage page says there is no minimum number of employees. One part-time employee generally requires a policy. DLI is the Department of Labor and Industry, the office for that coverage. DLI does not sell that policy. Ordinary shops buy a licensed private policy, or apply to self-insure with the Department of Commerce. A payroll login is not a policy.

Patriot’s registration article says you can sign up through a private provider or a state-operated fund. That state-fund line is what the software page says. Minnesota is not a monopolistic state fund. Do not treat Minnesota like Washington or Ohio on that point. Shops that cannot buy a voluntary policy may land in the residual market. That residual market is not an exclusive fund. Other licensed carriers can write a policy.

How Gusto and Patriot describe Minnesota

Confirm the live withholding number on e-Services. Confirm the unemployment account and rate on ui.mn.gov and on the Tax Rate Determination. Confirm Paid Leave on the Paid Leave Premium Rate Notice. Confirm workplace injury insurance with a licensed carrier or on the Department of Labor and Industry coverage page.

Gusto’s Minnesota help article says Middesk (Gusto’s business-verification company) may register state income-tax withholding and state unemployment insurance (SUI). It names the Minnesota Department of Revenue for withholding and the Minnesota Unemployment Insurance Program for unemployment tax and Paid Leave. It says Middesk’s standard order does not open Paid Leave. It then sends shops to ui.mn.gov for a joint SUI/PFML account or a Paid-Leave-only account. It calls the unemployment number an Employer Account Number (EAN) that starts with 0 and has seven digits. It tells shops not to enter the Workforce Assessment Rate, the Federal Loan Interest Assessment, or the Additional Assessment in the unemployment-rate field. It lists Minnesota Quarterly Withholding Worksheet files, the Income Tax Withheld Coupon, and MDES-1 among Minnesota files. MDES-1 is Gusto’s name for the quarterly contribution file. Confirm the live numbers on e-Services and ui.mn.gov. Confirm the rate on the Tax Rate Determination. Read Gusto’s Minnesota article. See Gusto on the directory.

Patriot’s tax table says Full Service files Minnesota Unemployment Insurance (SUI or SUTA) on the quarterly UI e-Services file. It files Minnesota income-tax withholding on Form MW-1 and the annual Form MW-3. Those MW-1 and MW-3 names are what the software page says. The 2026 Withholding Tax Instructions talk about electronic quarterly or annual returns on e-Services. Patriot also names Minnesota Paid Family and Medical Leave, the Additional Assessment, the Federal Loan Interest Assessment, and the Workforce Enhancement Fee. Patriot’s registration article says the Department of Revenue assigns a 7-digit tax ID. It tells new shops to open a joint UI/PFML account on the Unemployment Insurance Minnesota website. The article prints that the new-employer SUTA rate is based on the industry average. Use the rate on your Tax Rate Determination, not a number from a software page. The same article tells employees to complete Form W-4MN and puts the 20-day new-hire report on the Department of Human Services. The article also says workplace injury insurance can come from a private provider or a state-operated fund. The Department of Labor and Industry’s ordinary path is not a Washington-style exclusive state fund. Read Patriot’s article and Patriot’s registration article. See Patriot on the directory.

What still sits on the employer

• Decide that covered wages have been paid. Agricultural, domestic, nonprofit, and 25-percent owner-officer shops use other tests.
• Complete e-Services or Form ABR so the Department of Revenue can open withholding. Complete ui.mn.gov so the Unemployment Insurance Program can open unemployment after those wages are paid.
• Do not register the unemployment account until covered wages have actually been paid. Register before the first quarterly wage detail report is due.
• Hold the seven-digit Minnesota Tax ID. Hold the unemployment Employer Account Number. Do not substitute a federal EIN for either number.
• Enter the premium rate from the Tax Rate Determination, not a marketing figure. The Program assigns an industry average for new shops. Confirm the live notice.
• File the quarterly wage detail report on ui.mn.gov after the account exists, even in a zero-wage quarter until the Program closes the file.
• Register withholding on e-Services or Form ABR before the first withheld paycheck. Collect Form W-4 and Form W-4MN. A federal W-4 is not the Minnesota certificate. File the electronic withholding return the Department of Revenue assigns.
• File the 20-day new-hire report with the Minnesota New Hire Reporting Center. A quarterly ui.mn.gov wage report does not satisfy that clock.
• Buy workplace injury insurance when the first covered employee starts, even part-time. The Department of Labor and Industry does not sell that policy. Payroll software does not issue that policy.
• Withhold Paid Leave in 2026 when the Program says the premium applies. First premium payments are due April 30, 2026. Do not copy Maryland’s January 2027 start onto Minnesota.
• Do not copy another state’s clock onto Minnesota. Minnesota does not use California’s $100-quarter test. Minnesota does not use Missouri’s $1,500-quarter or 20-week unemployment test. Minnesota does not use Indiana’s $1 unemployment test. Minnesota does not use Maryland’s one-worker Combined Registration Application clock. Minnesota does not skip state paycheck withholding the way Texas, Florida, Washington, or Tennessee do. Minnesota does not add county income tax the way Maryland does. Minnesota does not use Florida’s four-employee workplace-injury wait. Minnesota does not use Missouri’s or Tennessee’s five-employee wait. Minnesota does not use the three-employee wait used in Georgia, North Carolina, or Virginia. Minnesota does not use Washington’s exclusive state fund. Minnesota does not use Ohio’s Bureau of Workers’ Compensation monopoly.

Related guide: How to pay tips to employees is the federal tip report. Minnesota still withholds state income tax on Form W-4MN.

Also forming a company in Minnesota? Process Score compares registered agents there.