You must withhold Minnesota income tax because the sick leave payments are considered wages. Report these payments and the tax withheld on federal Form W-2.This fact sheet goes over Minnesota tax credits, deductions, and programs that individuals with disabilities may qualify for. A worker with a disability has to be paid at least the minimum wage or a percentage thereof, based on the extent to which a worker's performance is limited. When can I enroll in STD? Employee benefit plans offer favorable treatment of contributions for federal and state income tax purposes. Disability Forms: General Employees Retirement Plan Application for Disability (pdf), Medical Statement (pdf), Employer Certification Form (pdf) Each time you pay wages, you must withhold—or take out of your employees' pay—certain amounts for federal income tax, social security tax, and Medicare tax. You cannot withhold UI tax from the wages you pay to employees. Tax rate factors for 2024.