Minnesota’s Department of Revenue has some advice for taxpayers: Please wait.
With 1 in 10 Minnesota taxpayers getting a tax break provided in the law Gov. Mark Dayton signed on Friday, the agency is going to need some time to make sure everyone is paying the right amount.
“This is a pretty complex task,” said Revenue Commissioner Myron Frans. “This is not something you normally want to do this late in the filing season.”
Not all of the tax breaks in the bill are retroactive, but the ones that are will benefit 22 categories of Minnesotans, from restaurants owners and nonprofit organizations to middle-income taxpayers. Low-income families, college students, parents who adopted children last year, educators who paid for classroom supplies and others will save $49 million in 2013 taxes because of the new law. That break will be shared by more than 250,000 taxpayers.
Because the tax changes were enacted only last week, the agency is asking taxpayers who could benefit to wait until April 3 to file their taxes. By then the agency, software vendors and tax preparers should have updated forms in place to process the tax breaks.
About half of all Minnesotans already have filed their tax returns, however. The Revenue Department said it would contact those filers about getting refunds if they are eligible to benefit from the new law. That process could take months, but the agency said most of those taxpayers would not have to file amended returns. The state will simply send checks to those who overpaid, or it will contact them for further information or if an amended return is needed.
Tax preparers bracing
Tax preparers said the phones have been ringing off the hook since the tax-relief law went into effect.
“We’re getting 60 to 70 calls per day where we’re basically telling people to calm down,” said Lynda Mohs, owner of Mohs Tax Service in St. Paul.
Preparers said that Minnesotans are confused about the changes and that some are even canceling their appointments with tax professionals. Mohs advised people not to cancel or delay their tax appointments or they would risk waiting until after April 15 for a new one.
Minneapolis tax preparer David Hogan said that most Minnesotans affected by the tax relief would get their return fixed automatically by the Revenue Department and that it would not require filing an amended return for Minnesota. “Most of the changes are for next year’s taxes anyway,” he said.
Minnesotans will pay $57 million less in 2013 taxes because of the tax-relief measure. By next year, when the provisions are fully phased in, nearly 1.2 million Minnesotans will pay fewer taxes. Starting in tax year 2014, more than 650,000 married couples will save an average of $115 because of the new state tax break.
Getting the word out
The relief, coming one year after DFLers raised taxes by nearly $2 billion, gives Dayton and legislators a popular talking point heading into re-election. Many of this year’s changes conform to tax breaks that the federal government adopted last year but that Minnesota failed to adopt. This year, as the state’s economic recovery strengthens, legislators decided the budget could afford to extend the tax breaks in state law.
The patience the Revenue Department is asking of taxpayers this year contrasts sharply with the scramble at the State Capitol to get the tax measure completed.
Dayton began last week saying he was “very, very, very disappointed” that the DFL-led Senate had not put a rush on the bill that had been passed earlier by the House.
The governor said his goal had been to get the tax bill enacted quickly, “so we didn’t have a repeat of what happened last fall with MNsure.” MNsure, the state health insurance exchange, had launched a website riddled with problems and inadequate staffing to answer the questions of anxious Minnesotans.
Dayton signed the tax bill just hours after both bodies gave it final passage on Friday afternoon. Minutes later, state tax officials began plotting how they would make sure Minnesotans knew what to do.
Working through the weekend, Revenue Department staffers began informing tax experts, created a new facet of the agency’s website and developed a strategy to get the word out.
This week, agency programmers are working on implementing the changes, officials are holding a series of media appearances, and experts are planning conference calls with private tax preparers and software vendors to get everything set. The department is also ready to make extra staff available to answer questions from taxpayers and to give the returns already filed an extra check to make sure people get refunds they deserve.
Rep. Greg Davids, R-Preston, said the tax agency seems to be doing its best.
“I’m going to cut the Department of Revenue some slack,” said Davids, a frequent critic of the Dayton administration.
Aaron Norman, a Mayo Clinic researcher from Rochester who adopted a baby girl in 2013, said he’s willing to wait to file his taxes.
The retroactive provision for those whose employers helped pay adoption expenses will save the Normans up to $800 on their 2013 taxes.
“We don’t have this kind of money just sitting around,” Norman said.
Norman said he and his wife were surprised to learn last summer that they would have to pay taxes on the assistance Mayo gave them to help them adopt. Three years ago, when they adopted a baby boy, they did not have to pay taxes on the help.
The tax break will make a big difference, he said.
After adopting their daughter, he said, “we just had tons of extra expenses. And to be taxed on top of it, that’s just crazy.”