Update: Federal Adjustments and 2017 Minnesota Income Tax Returns

 

The 2018 Minnesota Legislative Session has ended. The Minnesota Department of Revenue is providing guidance on filing 2017 Minnesota income tax returns with Schedule M1NC, Federal Adjustments.

What if I submitted my client’s 2017 return without Schedule M1NC?

If your client needs to complete Schedule M1NC, they must file Form M1X, Amended Minnesota Income Tax and include the schedule.

What if I submitted my client’s 2017 return with an incorrect Schedule M1NC due to timing issues with software updates?

Verify your software provider has made the necessary updates. If your client needs to complete Schedule M1NC, they must file Form M1X and include the schedule.

What if I submitted my client’s 2017 return with Schedule M1NC?

Review your client’s Schedule M1NC and verify they included all applicable items listed in the instructions for Schedule M1NC. If your client did not report items they were required to, they must file Form M1X and include Schedule M1NC.

If your client filed their return prior to March 1, federal legislation extended or modified several tax provisions that may affect their return. Your client must amend their Minnesota return if they amended their federal return for any of the reasons listed below. 

 

• They paid tuition and fees for post-secondary education (generally reported on federal Form 1098-T).
• They paid private mortgage insurance (generally reported on federal Form 1098). 
• They entered into an arrangement under which debt was discharged on their principal residence, including through a short sale or foreclosure.
• They lived in a California wildfire disaster area between October 8, 2017, and December 31, 2017, and received a distribution from their retirement account.
• They were a part-year Minnesota resident who lived in the California wildfire disaster area between Oct. 8, 2017, and Dec. 31, 2017, and they claimed the federal Earned Income Tax Credit.
• They suffered a casualty loss of personal property in a California wildfire disaster area.
• They contributed to a charitable organization for California wildfire relief efforts.
• They operated a business on an Indian reservation and placed assets in service.
• They placed certain mine safety equipment in service.
• They operated a motorsports entertainment complex and placed certain property in service.
• They paid certain film, television, or theatrical expenses.

Your client must amend their Minnesota return even if their refund or amount due does not change. Amending will ensure your client’s federal taxable income on Form M1 matches their federal taxable income on record with the IRS.

 

What will the department do now that the session has ended?

We will update the state tax filing systems for use in 2019 to accommodate the differences between the federal and Minnesota tax laws for tax year 2018.

We look forward to working with you and your clients to ensure you have the information, education, and services you need to meet your clients’ obligations under Minnesota law. We will work throughout the summer to engage you as we update our systems.