Minnesota Unemployment Insurance Tax – S Corporations and Special Rules

This is the tenth post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.

All wages paid to the officer or shareholder of an S corporation are covered wages for SUTA tax purposes. Some payments, however, are not covered wages, including:

  1. All pro rata dividends and earnings distributed by the corporation;
  2. Expense reimbursements;
  3. Loans to officers and shareholders;
  4. Corporate repayment of loans or interest to officers and shareholders; and,
  5. Rental payments on property personally owned by an officer or shareholder.

An agricultural employer is exempt from paying SUTA tax unless one of the following conditions is met:

  1. The employer pays 10 or more employees for at least 20 weeks during a single calendar year;
  2. The employer pays $20,000 or more to employees during a calendar quarter;
  3. The employer pays 4 employees for at least 20 weeks, excluding family members, farm officers, and workers 16 years of age and under; or,
  4. The employer pays $20,000 or more in cash or non-cash wages, excluding “family farm” officers as defined in Minnesota Statutes Section 500.24, and workers 16 and under.

Service performed by an officer or shareholder of a “family farm corporation,” as defined in Minnesota Statutes Section 500.24, is excluded from agricultural labor and employment unless the agricultural operation must pay FUTA tax.

Employers must pay SUTA tax on all covered wages of any household employee if the employer pays covered wages of more than $1,000 in any calendar quarter.