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Minnesota budget deal will bring PPP, unemployment tax relief. Here's what you need to know.

Minnesotans who have already paid state tax on unemployment benefits and Paycheck Protection Program funds will likely see the money returned to them soon.

ST PAUL, Minn. — The Monday morning announcement of a bipartisan budget deal in Minnesota will translate to a lot of money being returned to Minnesota taxpayers.

"We have about a billion dollars of tax relief," said Senate Majority Leader Paul Gazelka. "Everything from paycheck protection... to unemployment benefits, we're not going to tax those either."

The tax relief plan means, after months of uncertainty, most Minnesotans who paid state taxes on unemployment benefits, and all Minnesota businesses who paid taxes on forgiven Paycheck Protection Program (PPP) loans, will have money returned. The change means the state will now conform with the Federal tax code, which previously waived the taxes.

"With today being tax day... the full conformity around the PPP loans and the full conformity around the UI insurance, gives Minnesotans the certainty they need," said Minnesota Governor Tim Walz.

But because of the timing, most Minnesotans will have already paid the taxes and will now be waiting for a check or needing to amend their filing.

KARE 11 reporter, Kent Erdahl, spoke to two tax professionals about the changes and what you should keep in mind.

"The worst thing you can do is try to rush and do an amended return right now because that is just going to gum up all the works," said Ann Etter, Co-Owner of Goodney & Associates in Northfield. "So we're sort of in this holding pattern of waiting and seeing when the legislation comes out and also what Minnesota revenue is going to ask us to do. It will be good to have some clarity around everything."

Kent Erdahl: Do you wish you would have gotten that clarity a couple of months ago?"

Etter: "We all wish for that but I'm just happy that we have it. Better late than never is what my mother has always said, so I'm not complaining."

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Etter, says many of her clients have either already paid the state taxes on their unemployment benefits, or it's being automatically paid just prior to the deadline today. 

If you were among those who received unemployment in 2020 and made less than $150,000 for the year, Etter says you can expect a refund for taxes you paid on the first $10,200 of unemployment you received. 

"It will be a little while, but if you're due the money back, which many people will be, then they can expect to see a check at some point in the future," Etter said.

"I always tell people, just wait and Minnesota will fix it," said Justin Sundberg, owner of Sundberg Tax and Consulting. "It's the same with the PPP  loans."

Sundberg works mainly with small businesses, and while many had to pay state taxes on their PPP money, he says all of it will now likely be returned.

"That's a very big deal because the PPP could be tens of thousands of dollars, and all of a sudden when you have tens of thousands of dollars not taxed by Minnesota, that's a windfall," he said.

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But keep in mind, the legislature still needs to officially sign off, which won't come until June. Then the Department of Revenue will need to figure out if it can simply pay the money back or if you'll need to file an amended return.

"I know that that's super, super difficult because we want our money back right away, we want to have everything wrapped up and tied neatly with a bow, and I think that's pretty impossible this year," Etter said.

Erdahl: "The state should at least let you know what you're going to need to do, correct?" 

Etter: "Yes, if you are getting a refund automatically from the state, they'll send you a letter or a check. If it's something where they're going to make a determination where everybody has got to amend, I think you'll see it in the news." 

Erdahl: "We'll try our best."

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