State residency– does it matter?

Tax Residency Matters
Your residency status administrates how income you receive in the state of Minnesota is taxed by the state. Here is a brief overview of rules regarding taxation of Minnesota residents and non-residents.

If you live out of Minnesota for over half the year you may be able to avoid paying taxes for the state(MN) because you will be considered a non-resident. If an individual chooses to reside in Minnesota for at least 183 days, he will be considered a Minnesota resident regardless of his intent. Exceptions for the 183-day rule includes members of the military who are stationed in Minnesota but are permanent residents of another state. Individuals who chooses to live out of state for over half a year will find this beneficial because they will save a great deal of money for taxes. If you have any questions regarding the rules of Minnesota residency please feel free to contact one of our accountants today!

Senior Citizens
Taxpayers who are 65 years old or older tend to undergo lifestyle or income changes during the year. If an individual is retired, they may depart Minnesota or leave for a portion of the year. Retired taxpayer’s residency is still followed by the domicile(permanent residency) and the 183-day rule. This procedure can affect your residency for tax purposes, how much you will pay for tax, and whether you must pay estimated taxes. Minnesota has several tax credit, income subtractions and other programs for qualifying seniors. To qualify for common subtractions, you must meet income eligibility requirements and you must be at least 65 years of age or permanently disabled as well as receiving federally taxable disability proceeds. Common credits that may affect seniors include the marriage and dependent care credit. If qualified, these programs may lower the individual’s state income tax or allow them to put off part of their local property taxes. Types of income for seniors vary. If your only income is Social Security, you would not be required to file an income tax return. If Social Security is not your only income, it will be taxed by the state to the same extent as your federal return. If you collect pension income such as federal pensions while a Minnesota resident, it is taxable by the state regardless where your pension was earned. If you need more guidance on Minnesota income tax you can access link provided by the Minnesota State Revenue.

Personal Representative
Being a personal representative can be stressful due to additional responsibility for an estate of someone who has passed away. As a personal representative, you are responsible for filing the decedent’s final individual income tax returns for the year of death, even if there is a present spouse. The decedent’s final federal and state income tax returns are due on April 15 of the year following death. The decedent’s estate starts on the death of the decedent. A personal representative reports the estate’s income by filing an income tax return for estates and trusts for each year the estate is open, which is also due on April 15th. Estate tax on the other hand is a tax imposed on the value of the estate. The estate tax return is due nine months from the day of death. If the personal representative chooses to file late, make late payments, fail to file or pay, fraud, negligence or make substantial understatement of the decedent’s income they can face penalties under Minnesota and federal law. Click on the link if you would like more information regarding personal representatives.