Minnesota Standard Deduction Correction – Tax Notice Could Follow

On September 24, 2021, the Minnesota Department of Revenue announced that their worksheet for calculating the Minnesota standard deduction limitation had been incorrect in their Instruction Booklet for both tax years 2019 and 2020. On the original worksheet, the standard deduction limitation was being reduced by 20%, which was incorrect. Instead, the worksheet should have been reducing the standard deduction by 80%.

Taxpayers may be subject to changes in their Minnesota income tax if their federal adjusted gross income exceeds the thresholds in the table provided below:

Filing Status Tax Year 2019 Tax Year 2020
Single $276,000 $280,534
Married Filing Jointly $357,334 $363,200
Qualified Widow(er) $357,334 $363,200
Married Filing Separately $178,675 $181,609
Head of Household $317,000 $322,200

Due to the timing of the announcement, tax software developers were not able to update their Forms ahead of the extended 2020 individual income tax return deadline of October 15, 2021. If you have already filed your 2019 and/or 2020 Minnesota Individual Income Tax Return, there is no action to take on your end. Minnesota Department of Revenue has announced that they will manually adjust any tax returns for the changes in the standard deduction limitation. If this results in a change in your taxes due for that tax year, you will receive a letter from the Minnesota Department of Revenue.

Please contact your CPA to verify the changes made are correct before paying the additional tax. Also note that because this was an error by Minnesota Department of Revenue, no penalties or interest should be included on the assessment, if paid within 60 days.

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