'What's the holdup?' Minnesotans wait for tax refunds approved months ago

ST. PAUL, Minn. (FOX 9) - After two months, Minnesota revenue officials cannot say when they'll start sending out checks to 550,000 taxpayers owed refunds on 2020 unemployment benefits and payroll loans.

The Legislature approved the tax breaks in late June, providing relief to Minnesotans who'd been laid off during the COVID-19 pandemic and were left with an income tax bill on their jobless benefits. The relief also extended to companies that had gotten Paycheck Protection Program loans from the federal government.

But the Minnesota Department of Revenue has not sent out the refunds -- worth $454 million for the payroll loans and $234 million on unemployment benefits -- and blames the delay on a system change.

"It's hard to believe that these checks are not already out, quite frankly. I don't know what the holdup is," said state Sen. Carla Nelson, R-Rochester, who chairs the Senate Taxes committee. "You know, it's not like this just happened."

The saga started when the divided Legislature missed the tax filing deadline. Minnesota law required the payroll loans and unemployment benefits to be treated as taxable income, throwing the state out of balance with the federal government, which had forgiven the full amount of PPP loans and the first $10,200 of 2020 jobless benefits.

On May 17 -- the day of the tax filing deadline, which had been extended -- top lawmakers and Gov. Tim Walz announced a deal to conform to the federal government's changes. But Revenue Department officials said they had to wait until June 30, when the bill became law, to start the refund process.

A spokesman said the Revenue Department started testing its new refund system this week. He declined to give a timeline.

"The uniqueness and timing of this type of system change makes it imperative that we get the development and testing parts of this process right so there aren’t mistakes that could result taxpayers missing out on the intended benefits or not getting the right refund amount," said Ryan Brown, the agency's spokesman.

About 542,000 of the affected people and companies will get refunded automatically, Brown said. The other 8,000 taxpayers have been notified that they'll need to file an amended return.

About 2,000 taxpayers, all corporations, will get refunds sooner because their process requires no system change.

Hundreds of thousands of Minnesotans were furloughed or laid off at the start of the pandemic as the global economy froze overnight. They received a federal boost of $600 a week on top of regular state benefits.

Jason Salzwedel of Zimmerman said he's waiting on several hundred dollars from the state, money he initially owed on unemployment benefits Salzwedel collected during a two-month furlough.

Salzwedel said he tried calling the Revenue Department recently but didn't get a satisfactory answer.

"Pretty much their explanation -- if you can even call it an explanation -- was there's thousands of other people going through the same thing," he said. "If you owe them money, they want it yesterday. All of a sudden, when they take something that's ours, it feels like, 'We'll get around to it."