North Dakota Tax Form ND-1 - Individual Income Tax Form Instructions

General Informations 

Changes affecting you and your income tax

Developments, updates, and items of interest relating to individual income tax

Later than usual mailing of income tax booklets

Traditionally, the income tax booklet is mailed to taxpayers on or after December 26th. The mailing of the 2008 booklet, however, was delayed because of the property tax relief income tax credit law. The printing of the booklet had to be delayed until after November 15th, which was the date on which the Tax Department was required to determine the total property tax relief income tax credits claimed for the 2007 tax year. If the total credits reached or exceeded statutorily set threshold amounts, changes would have been required to be made to how the credits are calculated, resulting in reduced credits being allowed on the 2008 income tax return for some taxpayers. The changes would have affected Schedule PT, which is included in this booklet.

Property tax relief income tax credits for 2008

Eligible property taxes The 2008 income tax year is the second year of the two-year property tax relief income tax credit program enacted by the 2007 North Dakota Legislature. For purposes of calculating the credits on the 2008 income tax return, the eligible property taxes are the 2007 real estate tax and the 2008 mobile home tax that became due in the 2008 calendar year. To be eligible to claim these property taxes in calculating a property tax relief credit, you must have owned the eligible property on the due date of these taxes. The 2007 real estate tax became due on January 1, 2008, and the 2008 mobile home tax became due on January 10, 2008.

Special situations Following are special situations that generated some of the more common questions about the property tax credits.

Property classification—Many taxpayers did not know whether they had residential, agricultural, or commercial property. The

classification is based on how the property is classified by the county for property tax purposes. Its classification is not necessarily based on its location or use. For example, an apartment building having up to three apartment units is classifi ed as residential. However, an apartment building having four or more apartment units is classified as commercial, regardless of its location or use for residential purposes.

Leased (or rented) property—If property is leased, only the property’s owner may claim the credit. The lessee may not claim the credit, even if the lessee agrees as part of the lease contract to pay the property taxes.

Life estate—A common situation involves parents placing the deed to their home in the name of one of their children and retaining a life estate in the home. This allows the parents to continue living in the home with all rights and obligations of ownership until their death, at which time all ownership rights pass to the child. In this case, the life estate holder (parents) may claim the credit.

Grantor-type trust—Generally, property placed in a trust is not eligible for the property tax relief credits. One exception applies to what is known as a “grantor-type trust.” In general, this is a trust over which the grantor—that is, the person who places the property in the trust—retains the power to revoke or control the trust, in which case the grantor (and not the trust) is still considered the owner of the property in the trust for federal income tax purposes. Assuming all other eligibility requirements are met, the grantor of this type of trust may use the property taxes on the property in the trust for the credit.

Property or parcel number—Many taxpayers did not enter the correct property or parcel number on Schedule PT, the supplemental schedule to Form ND-1 on which the credits are calculated. This number is a multiple-digit number, which may also include alphabetic letters, that is called a “property number” or “parcel number” on the property tax statement. Do not use the property’s address or legal description.

For other special situations, go to the Office of State Tax Commissioner’s website at www.nd.gov/tax and click on Property Tax Relief on the left-hand side of the page.

Carryover of unused 2007 property tax relief credits

Two new lines have been added to Form ND-1 on which to enter the amount of an unused 2007 property tax relief credit. Line 21a was added for an unused 2007 residential and agricultural property tax credit, and line 21b was added for an unused 2007 commercial property tax credit. Do not enter any unused 2007 property tax credit on Schedule PT.

Important: In the case of an unused 2007 residential and agricultural property credit, if an individual elected to receive a 2007 Property Tax Relief Certificate for the amount of the unused credit, the unused credit should not be entered anywhere on the 2008 return.

Marriage penalty tax credit for joint filers

Changes for 2008

The calculation of the marriage penalty credit for 2008 was changed as follows:

  • The amount allowed as a deduction in calculating the taxable income of the spouse with the lower earned income was increased from $8,750 to $8,950. This number is made up of one personal exemption and one-half of the standard deduction amount for married persons filing jointly, which for 2008 equal $3,500 and $5,450, respectively.
  • The maximum credit allowed was increased from $300 to $305 as a result of indexing the amount for inflation.
  • The joint North Dakota taxable income threshold and the earned income threshold of the spouse with the lower earned income were changed to $54,454 and $30,854, respectively. These are the amounts below which no credit is generated.

All of the changes have been included in the calculation worksheet for 2008 on page 12 of this booklet.

Not all joint filers receive the marriage penalty tax credit

The first year the marriage penalty tax credit was allowed was 2007. Some married taxpayers who filed a joint 2007 return found that their calculation resulted in no credit for them. Based on the conditions set out in the instructions to the return, they thought that they would get a tax credit.

The calculation of the credit is prescribed by statute, which sets out a calculation method intended to keep the calculation reasonably simple and to allow for consistent application. Whether or not a credit amount is generated will depend on how the spouses’ fact situation fits into the statutorily-prescribed calculation. The North Dakota taxable income and earned income thresholds shown in the instructions to Form ND-1 only serve to show the amounts below which the prescribed calculation will not generate a credit of at least $1.00.

Historically, it has been difficult to develop a deduction or credit within the federal and state income tax structures that simply negates the so-called “marriage penalty.” In many cases, too, a “marriage penalty” does not exist on a joint return filed by married persons; instead, there is a “marriage bonus” because the tax on a joint return is less than the combined taxes on single returns.

Mailing of estimated tax forms cut back for 2009

In past years, if an individual made one or more estimated North Dakota income tax payments for a tax year, an estimated tax form package—consisting of Form 400-ES, four payment envelopes, and instructions— was automatically mailed to the individual for the following tax year. However, most individuals do not use the vouchers mailed to them by the Tax Department to make their estimated payments. Instead, most individuals use a voucher that is downloaded and printed from the Tax Department’s website or from tax software acquired by them or their tax preparers. For this reason, the Tax Department is cutting back the number of estimated tax form packages that will automatically be mailed to individuals who make estimated tax payments. Starting with the 2009 estimated tax form package to be mailed in early 2009, the automatic mailing will only go to those individuals who used the 2008 estimated tax payment voucher that was mailed to them by the Tax Department. An individual who does not receive the 2009 estimated tax payment package, but would like one, may contact the Tax Department to request one—see the back cover of this booklet.

National Guard or Reserve member deduction is clarified

The instructions to the deduction currently allowed to a member of the National Guard or the U.S. armed forces reserve who enters federal active duty were changed. The change clarifies that the deduction is allowed regardless of whether the member is involuntarily ordered to such duty or the member volunteers for such duty. In either case, though, the member will receive orders reflecting that the service is under Title 10 of the U.S. Code. The deduction is not allowed for service under Title 32 of the U.S. Code, which means service under the command of the governor and adjutant general. The deduction also is not allowed if the compensation is received for attending basic military training, annual training, or professional military training or developmental education.

New income exclusion allowed to certain newly hired employees

An individual is eligible for an income exclusion—called the employee workforce recruitment exclusion— if all of the following conditions are met:

  1. The individual’s employment qualifies the individual’s employer for the workforce recruitment income tax credit.
  2. The individual receives a statement from the employer verifying the employer’s eligibility for the workforce recruitment income tax credit and identifying the excludable income, which must consist of a hiring bonus, moving expense payment, or a nontypical fringe benefit.

For more details about the workforce recruitment income tax credit, see the instructions to the 2008 Schedule ND-1TC, line 13.

Forms changes to note

On Form ND-1, page 2, the credit section of the form was restructured for 2008, and two new lines were added on which to enter a carryover of an unused 2007 property tax income tax credit. Schedules ND-1SA (state adjustments) and ND-1TC (tax credits), which were combined on one form for 2007, will be on separate forms for 2008. Also, revisions were made to Schedule PT (property tax credits) to provide additional guidance to taxpayers.

New helpline phone numbers

The phone numbers for tax questions and forms have been changed as follows:

  • Toll-free 1-877-328-7088 (in North Dakota)
  • Bismarck-Mandan local calling area, or from outside North Dakota—

Questions (701) 328-1247
Forms (701) 328-1243

Individuals needing help due to speech or hearing impairment may continue to call Relay North Dakota at 1-800-366-6888, and then ask for one of the above numbers.

Tips for trouble-free filing

A complete and accurate return ensures the fastest processing of your return as well as a fast refund. Errors or omissions in the return mean delayed processing and possibly having to contact you.

Important: A return missing a signature or a copy of the federal return is not a properly filed return, and it will be sent back to you. This could result in late filing and payment charges if you resubmit the return after the due date.

Before you file, check the following—

  • Write legibly Our inability to read your information may result in errors.
  • Enter your correct social security number We use this number to identify your return. If married, include your spouse’s social security number.
  • Check your math Math errors are one of the most common errors made.
  • Include all Form W-2s Be sure to include a copy of all your W-2s. Also include a copy of any Form 1099 or North Dakota Schedule K-1 showing North Dakota income tax withholding.
  • Use the right address Amazingly, thousands of North Dakota returns are mailed to the Internal Revenue Service by mistake each year. Use the preprinted envelope in this booklet.
  • Use the right postage Insufficient postage means the U.S. Postal Service will send your return back to you.
  • Sign the return Each year we receive thousands of unsigned returns. Before we can process them, we must return them to taxpayers for their signatures.
  • Include a copy of your federal return A copy of the federal return is part of a complete state return. If it’s missing, we cannot process the return, and it will be sent back to you.

General and specific line instructions for Form ND-1

This section provides information on selecting the right form, filing requirements, procedures for obtaining an extension, estimated tax requirements, correcting a return, and other general information.

Which form to use

North Dakota income tax law provides for two methods of calculating the individual income tax. The two methods are implemented on two different forms—Form ND-1 and Form ND-2. (This booklet contains only Form ND-1 and its instructions.)

Your choice of forms will affect the amount of your tax!

The two forms (and their respective calculation methods) are governed by different provisions of North Dakota income tax law. Because the calculation method and tax rates are different under each method, you will calculate a different tax under each one. For the majority of individuals, the tax will be the lowest on Form ND-1.

So, which form should I use?

Generally, you should use Form ND-1. Over 98 percent of all filers will calculate a lower tax on Form ND-1 than on Form ND-2. If you used Form ND-2 last year, do not automatically use Form ND-2 for this year, but check out Form ND-1 to make sure you are paying the lowest tax.

Who should use Form ND-2?

Very few individuals will benefi t from using Form ND-2. Form ND-2 should be used only if it produces a tax that is lower than the tax calculated on Form ND-1. Although you calculate a North Dakota taxable income on both forms, do not base your choice on this number alone. You must also consider the tax rates which are much lower on Form ND-1.

Shouldn’t I use Form ND-2 if I have one of the deductions or credits on it?

Not necessarily. There are a number of special deductions, exclusions, and credits that may be claimed only if Form ND-2 is used. As a general rule, they are usually not enough to offset the higher tax rates on Form ND-2. Some taxpayers will benefit from using Form ND-2, but they make up less than 2 percent of all individual filers in North Dakota. If in doubt as to which form to use, use Form ND-1. If you fi nd later that your tax would have been lower on Form ND-2, you have the option of filing an amended return (within the statutorily prescribed time periods) to change forms.

Who must file

Property tax relief—Even though you do not have to file a 2008 North Dakota income tax return, you may be eligible for property tax relief. Obtain the 2008 Form ND-3 for more information.

Full-year resident

If you were a full-year resident of North Dakota for the 2008 tax year and you are required to file a 2008 federal individual income tax return, you must file a 2008 North Dakota individual income tax return. This applies even though you may have worked outside North Dakota (including employment overseas) during the tax year, or you have other income from sources outside North Dakota. You were a full-year resident of North Dakota if you were a resident of North Dakota for the entire tax year, or you meet the statutory 7-month rule.

Definition of resident—In these instructions, the term “resident” refers to an individual who is a legal resident of North Dakota. Legal residence (which is also called domicile) means the place that is your permanent home to which

you always intend to return whenever absent from it. If you have more than one physical place of abode, only one of them may be your legal residence. Legal residence is based on your intent and your actions.

Statutory 7-month rule—Even though you were not a resident of North Dakota for any part of the tax year—that is, you were a full-year nonresident—you must file as a full-year resident of North Dakota if you maintain a permanent place of abode in North Dakota and spend in the aggregate more than 210 days of the tax year in North Dakota. A permanent place of abode means a house, apartment, or other dwelling containing cooking and bathroom facilities that is suitable for year-round living and is maintained on a permanent or indefinite basis. This 7-month rule does not apply if you were (1) a part-year resident of North Dakota, (2) a full-year nonresident serving in the U.S. armed forces, or (3) a full- year resident of Montana or Minnesota covered by reciprocity.

 Residents in U.S. armed forces—If you were a resident of North Dakota serving in the U.S. armed forces in 2008 and you are required to file a 2008 federal individual income tax return, you must file a 2008 North Dakota individual income tax return as a full-year resident. This applies regardless of where you were stationed during 2008.

Full-year nonresident

If you were a full-year nonresident of North Dakota for the 2008 tax year, you must file a 2008 North Dakota individual income tax return if both of the following apply:

  • You are required to file a 2008 federal individual income tax return.
  • You derived gross income from North Dakota sources during the 2008 tax year. (See the box on page 5 for what is included in gross income from North Dakota sources.)

You were a full-year nonresident if you were not a resident of North Dakota for any part of the tax year, and you do not meet the statutory 7-month rule—see page 4.

Nonresidents in U.S. armed forces—If you were a full-year nonresident of North Dakota serving in the U.S. armed forces in 2008 and your only gross income from North Dakota sources was your military compensation, you are not subject to North Dakota income tax. You do not have to file a North Dakota income tax return unless you are married and are filing a joint federal income tax return, and your spouse is required to file a North Dakota income tax return.

Minnesota or Montana resident—If you were a Minnesota resident in 2008, you do not have to file a North Dakota individual income tax return if both of the following apply:

  • Your only gross income from North Dakota sources was compensation for personal or professional services.
  • You returned to your home in Minnesota at least once each month during the time you worked in North Dakota.

If you are a Montana resident, you do not have to file a North Dakota individual income tax return if your only gross income from North Dakota sources was wages.

See Reciprocity on page 6 for more information.

Nonresident alien—If you were a nonresident alien of the United States and you received gross income from North Dakota sources during 2008, you must file a 2008 North Dakota individual income tax return. Except where an income tax treaty between the United States and a foreign country specifically exempts income from taxation by a U.S. state, income tax treaties between the U.S. and foreign countries do not apply for North Dakota income tax purposes. Therefore, you may have to pay North Dakota income tax on income derived from North Dakota sources even though the income is exempt from U.S. income tax because of a treaty. For more information, including the instructions on how to complete the North Dakota return, obtain the Income Tax Guideline: Taxation of Nonresident Aliens.

Part-year resident

If you were a part-year resident of North Dakota for the 2008 tax year, you must file a 2008 North Dakota individual income tax return if both of the following apply:

  • You are required to file a 2008 federal individual income tax return.
  • You derived gross income from any source inside or outside North Dakota while you were a resident of North Dakota, or you derived gross income from North Dakota sources while you were a nonresident of North Dakota. (See the box on this page for what is included in gross income from North Dakota sources while a nonresident.)

You were a part-year resident of North Dakota if you were a resident of North Dakota for only part of the year. This generally applies if you moved into or out of North Dakota and the move constituted a change in your legal residence. See Definition of resident on page 4.

Native Americans

If you are a Native American, you are not subject to North Dakota income tax and do not have to file a North Dakota income tax return if all of the following apply:

  • You are enrolled as a member of a federally-recognized Indian tribe.
  • You lived on any Indian reservation in North Dakota.
  • You derived all of your income from sources on any Indian reservation in North Dakota.

If any of the above criteria are not met, you may be subject to North Dakota income tax. For more information, obtain the Income Tax Guideline: Income Taxation of Native Americans.

Gross income from North Dakota sources (for nonresidents only)

Gross income from North Dakota sources includes the following items received while a nonresident of North Dakota:

  • Compensation for services performed in North Dakota, such as wages, salaries, tips, commissions, and fees.
  • Income from tangible property in North Dakota, such as rents, royalties, and gain from the sale or exchange of the property.
  • Income from a sole proprietorship, partnership, S corporation, or other trade or business carried on in North Dakota.
  • Income from an estate or trust, but only to the extent the income is derived from tangible property or a trade or business in North Dakota.
  • Income from gambling activity carried on in North Dakota.

Exceptions Gross income from North Dakota sources does not include these items received while a nonresident of North Dakota: military pay, interest, dividends, pensions, annuities, gain from the sale or exchange of intangible property, compensation exempted under reciprocity with Minnesota or Montana, or compensation for services performed in North Dakota by an individual who performs regularly assigned duties in more than one state for an interstate motor, rail, air, or water carrier company, as provided under federal interstate commerce law.

Note: Interest, dividends, gains, and other income from intangible property are included in gross income from North Dakota sources if derived from a sole proprietorship, partnership, or S corporation doing business in North Dakota.

Reciprocity

North Dakota has income tax reciprocity agreements with the states of Minnesota and Montana. If certain conditions in the agreements are met, a resident of North Dakota does not have to pay Minnesota or Montana income tax on compensation received for work performed in the other state, and a resident of Minnesota or Montana does not have to pay North Dakota income tax on compensation received for work performed in North Dakota.

Minnesota and Montana residents

If you are a resident of Minnesota and you maintain a permanent home in Minnesota to which you return at least once each month during the time you work in North Dakota, the compensation you receive for personal or professional services performed in North Dakota is not taxable by North Dakota.

If you are a resident of Montana, wages you receive for work performed in North Dakota are not taxable by North Dakota.

If you received wages covered by reciprocity, and your employer withheld North Dakota income tax from them, you must file a North Dakota individual income tax return at the end of the tax year to obtain a refund of the amount withheld. If this applies to you and you do not have any other gross income from North Dakota sources, obtain Form ND-1 and complete it as follows:

  1. Complete the applicable items at the top of Form ND-1, page 1 (up to line D), as instructed.
  2. Fill in the circle for “MN/MT RECIPROCITY” at the top of Form ND-1, page 1. Also enter “MN” or “MT”, whichever applies, on the line next to the circle.
  3. Leave line D and lines 1 through 25 blank.
  4. Fill in the amount of the North Dakota income tax withheld on lines 26, 28, 29, and 32.
  5. File Form ND-1 with a copy of your federal return and Form W-2s showing North Dakota income tax withholding.

If your wages are covered by reciprocity and you do not want your employer to withhold North Dakota income tax from them, you must complete Form NDW-R and give it to your employer. Ask your employer for this form.

North Dakota residents

If you are a resident of North Dakota and you maintain a permanent home in North Dakota to which you return at least once each month during the time you work in Minnesota, the compensation that you receive for personal or professional services performed in Minnesota is not taxable by Minnesota. Also, wages you receive for work performed in Montana while a resident of North Dakota are not taxable by Montana.

If you received wages covered by reciprocity and your employer withheld Minnesota or Montana income tax from them, you must file an income tax return with Minnesota or Montana to obtain a refund of the amount withheld. If your wages are covered by reciprocity and you do not want your employer to withhold Minnesota or Montana tax from them, you must give your employer a properly completed Minnesota Form MW-R or Montana Form NR-2, whichever applies. For assistance and forms, contact:

  • Minnesota Revenue
    Mail Station 5510
    St. Paul, MN 55146-5510
    Phone: (651) 296-3781
    Web: www.taxes.state.mn.us
  • Montana Department of Revenue
    PO Box 5805
    Helena, MT 59604-5805
    Phone: (406) 444-6900
    Web: www.mt.gov/revenue

Changed for 2008!

When and where to file

If you are filing on a calendar year basis, you must file your 2008 North Dakota individual income tax return on or before April 15, 2009. If you are filing on a fiscal year basis, you must file on or before the 15th day of the fourth month following the close of your fi scal tax year. If the due date falls on a Saturday, Sunday or holiday, you have until the next day that is not a Saturday, Sunday, or holiday to file your return.

Mail your return in the preaddressed envelope provided in this booklet. If you don’t have a preaddressed envelope, mail it to:

Office of State Tax Commissioner
PO Box 5621
Bismarck, North Dakota 58506-5621

Extension of time to file

You may obtain an extension of time to file your North Dakota individual income tax return by obtaining either a federal extension or a North Dakota extension.

Federal extension

If you obtain an extension of time to file your federal return, it will be recognized for North Dakota purposes. This includes the automatic extension allowed for being outside the U.S. and Puerto Rico on April 15. You do not have to file a separate state extension form, nor do you have to notify the Office of State Tax Commissioner that you have obtained a federal extension prior to fi ling your North Dakota return. Fill in the circle next to “Extension” at the top of page 1 of Form ND-1.

North Dakota extension

If you do not obtain a federal extension, but need additional time to file your North Dakota return, you may apply for a North Dakota extension by completing and filing Form 101. This is not an automatic extension—you must have good cause to request a North Dakota extension. Form 101 must be postmarked on or before the due date of your return. You will be notifi ed whether your extension request is approved or rejected. If approved, fill in the circle next to “Extension” at the top of page 1 of Form ND-1.

Extension interest

If you obtain an extension and file your North Dakota return on or before the extended due date, and you pay any tax balance due with the return, no penalty will be charged. Interest on any tax due on the return will be charged at the rate of 12% per year from the original due date of your return to the earlier of the date you file your return or the extended due date.

Prepayment of tax due

If you are applying for an extension of time to file, you may prepay the tax that you expect to owe to avoid paying extension interest. To do so, submit your check or money order along with a completed 2008 Form 400-EXT on or before the due date of your return (excluding extensions). Alternatively, you may submit your payment along with a letter containing the following:

  • Your name.
  • Your social security number.
  • Your address and phone number.
  • Statement that you are making a 2008 Form 400-EXT payment.

Penalty and interest

The full amount of your tax due must be paid by the due date (without extension) of your return to avoid penalty and interest charges. However, if you obtained an extension of time to file your return, you may pay the tax due by the extended due date of the return without penalty, but extension interest will apply—see Extension interest and Prepayment of tax due on this page.

If you file your return on or before its due date (or extended due date), but you pay your tax due after the due date (or extended due date), a penalty equal to 5% of the tax due or $5.00, whichever is greater, must be paid.

If you do not file your return on or before its due date (or extended due date), a penalty equal to 5% of the tax due or $5.00, whichever is greater, for the month the return was due plus 5% of the tax due for each additional month (or fraction of a month) during which the return remains delinquent, not to exceed 25% of the tax due, must be paid.

In addition to any penalty, interest must be paid at the rate of 1% per month (or fraction of a month), except for the month in which the tax was due, on any tax due that remains unpaid after the due date (or extended due date) of the return.

Copy of federal return

You must attach a complete copy of your 2008 federal income tax return to your North Dakota return. A complete copy consists of Form 1040EZ, 1040A, or 1040 along with any supplemental forms and schedules. You do not have to include depreciation schedules or any other statements that you may have prepared as supporting documentation.

Changing your return

If you need to change your North Dakota return after you file it, you must file an amended return. There is no special form for this purpose. See How to prepare an amended return later on this page.

If you paid too much tax because of an error in your return, you generally have three years after you file your original return to file an amended return to correct the error and claim a refund of the overpayment. There are other time periods that may apply, such as in the case of a net operating loss carryback, an overstatement of tax of over 25%, or an IRS audit. For more information, contact the Office of State Tax Commissioner.

Penalty and interest apply to additional tax due on an amended return.

Change to federal return

By law, you must file an amended North Dakota return to report changes made to your federal return. This applies whether the changes are attributable to your filing of an amended federal return, or an audit or correction by the IRS. The amended North Dakota return must be filed within 90 days after filing the amended federal return or within 90 days after the final determination of the IRS changes.

How to prepare an amended return

  1. Obtain a blank North Dakota individual income tax return for the tax year affected by the changes.
  2. Enter your name, current address, social security number, and other information required in the top portion of the return.
  3. Fill in the applicable circle next to “Amended” in the top right-hand corner of the return.
  4. Using the revised information, complete the return through the net tax liability line.
  5. Leave the line for income tax withholding blank unless you are claiming an additional amount not previously claimed.
  6. On the “Total payments” line (line 28), enter the net tax liability shown on your original return or previously filed amended return.
  7. Complete the remaining portion of the return according to the instructions. On an amended return, you may not adjust the amount of any voluntary contribution to the wildlife or trees funds, nor the amount of an overpayment applied to the next year’s estimated tax.
  8. Attach a statement explaining why you are changing your return. If you are doing so because of changes you or the IRS made to your federal return, attach a copy of the amended federal return or IRS notice.

Estimated tax requirement (for 2009)

You must pay estimated North Dakota income tax for the 2009 tax year if all of the following conditions apply:

  1. You are required to pay estimated federal income tax for 2009.
  2. Your net tax liability for 2008 is $500 or more. (If you are not required to file a North Dakota return for 2008, you do not have to pay estimated tax for 2009.) 8 North Dakota
  3. You expect to owe (after subtracting any estimated North Dakota income tax withholding) at least $500 in tax for 2009.
  4. You expect your North Dakota income tax withholding for 2009 to be less than the smaller of the following:
    • 90% of your 2009 net tax liability.
    • 100% of your 2008 net tax liability. If you moved into North Dakota during 2008 and had no income from North Dakota prior to the move, this 100% threshold does not apply; you must satisfy the 90% threshold in part(a).

In general, one-fourth (25%) of the total estimated tax required to be paid for the 2009 tax year must be paid by April 15, June 15, and September 15, 2009, and January 15, 2010.

If you are required to pay estimated tax for 2009, obtain the 2009 Form 400-ES, Estimated income tax—individuals.

How to file a return for a deceased taxpayer

If a final federal income tax return is required to be filed for a decedent for the year of death, a final North Dakota income tax return must also be filed. A court-appointed personal representative is responsible for filing the decedent’s final return, even if there is a surviving spouse. The information from the final federal return is used to complete the final North Dakota return, and the North Dakota return is to be signed in the same manner as required for federal income tax purposes. If there is a personal representative and no surviving spouse, a copy of the court document showing the appointment must be attached to the final return. If there is a surviving spouse and the final return will be filed on a joint basis, a refund will be mailed in both spouses’ names.

If the surviving spouse experiences any problem with depositing or cashing the check, or if there is no surviving spouse and no personal representative has been appointed for the decedent, contact the Individual Income Tax Section, Offi ce of State Tax Commissioner for assistance (see the back cover of this booklet). Fill in the circle for “Deceased” next to the deceased taxpayer’s name at the top of Form ND-1.

General instructions for completing Form ND-1

Before you begin . . . .

Be sure to have a copy of your completed 2008 federal income tax return at hand. You will need information from it to complete Form ND-1.

Rounding of numbers

You may enter your numbers on the return in dollars and cents, or you may round your numbers to the nearest whole dollar. If you choose to round your numbers, drop the cents if less than 50 cents and round up to the next whole dollar amount if 50 cents or higher. For example, $25.36 becomes $25.00, and $25.50 becomes $26.00.

Part-year resident or full-year nonresident of North Dakota

If you were a nonresident of North Dakota for part or all of the tax year, you must complete and attach Schedule ND-1NR to Form ND-1. On Schedule ND-1NR, you will indicate whether you were a full-year nonresident or a part-year resident by filling in your residency information at the top of the schedule.

If you are married and filing a joint return, and either you or your spouse was a nonresident of North Dakota for part or all of the tax year, you must complete Schedule ND-1NR on a joint basis and attach it to Form ND-1. On Schedule ND-1NR, each of you must indicate your residency status by filling in your residency information at the top of the schedule.

Specific instructions for top of page 1, Form ND-1

Fiscal year filer only

If you used a fiscal tax year for federal income tax purposes, enter in the spaces provided the ending date of your fiscal tax year as shown on your federal return.

Name and address

Enter your full name and address in the spaces provided on the return. If you are married and filing a joint return, include your spouse’s full name.

If the taxpayer died during the 2008 tax year, fill in the circle for “Deceased” next to the taxpayer’s name.

Social security numbers

Enter your social security number (and your spouse’s social security number, if married ) in the spaces provided on the return.

Item A - Filing status

Fill in the circle next to the fi ling status that you used on your federal individual income tax return.

Item B - School district code

Select the code number from the list on page 19 for the school district in which you resided for most of the tax year and enter it in the spaces provided on the return.

Item C - Income source code

Select the code number corresponding to the area from which you derived the majority of your income for the tax year.

Source of income  Code number
Farming, ranching, or agricultural production 1
Retail, wholesale trade, and eating and drinking places 2
Federal, state, county, or city government service 3
Public or private education 4
Accounting, legal, health, motel, and other personal or professional services not classifi ed elsewhere 5
Construction 6
Manufacturing 7
Transportation, communication, and public utilities 8
Exploration, development, and extraction of coal, oil, and natural gas 9
Banking, insurance, real estate, andother fi nancial services 10
Military service 11
Retirement(Pensions, annuities, IRAs, etc.) 12

Amended return

If you are filing this return for the purpose of changing a return you previously filed for the 2008 tax year, fill in the circle next to one of the following:

  • General if you are changing the return for any reason except a federal net operating loss carryback.
  • Federal NOL if you are changing the return because of a federal net operating loss carryback.

See Changing your return on page 7 for more information.

Extension

Fill in the circle next to “Extension” only if you have an extension to file your North Dakota return. See Extension of time to file on page 6 for more information.

Federal estimated tax requirement

If you were required to pay estimated federal income tax for any part of the 2008 tax year, you must fill in the circle next to “Yes.” This applies whether or not you actually made the required payment. Otherwise, fill in the circle next to “No.”

MN/MT reciprocity

Fill in the circle next to “MN/MT Reciprocity” only if you are a Minnesota or Montana resident who is filing this return solely to claim a refund of North Dakota income tax because of reciprocity. See page 6 for details.

Specific instructions for lines 1 through 37, Form ND-1

Line 1 -Federal taxable income

If your federal taxable income is a negative number (that is, it is less than zero mathematically), you are instructed to enter zero on your federal income tax return. However, for purposes of completing Form ND-1, enter the negative number on line 1. Enter a minus sign (-) to the left of the number.

Line 2 -Lump-sum distribution

If you received a lump-sum distribution from a qualified retirement plan that you elected to report on Federal Form 4972 (Tax On Lump-Sum Distributions), you must enter on this line the amount from Form 4972, line 6 plus line 10. However, if you received the distribution while a nonresident of North Dakota, do not make an entry on this line.

Line 3 -Loss from financial institution

Enter on this line the amount of a loss reported to you by a partnership, S corporation, or other passthrough entity that is subject to North Dakota’s financial institution tax under N.D.C.C. ch. 57-35.3. For more information, obtain the Income Tax Guideline: Adjustment For Income (Loss) From A Passthrough Entity Subject To N.D.C.C. ch. 57-35.3.

Line 4 -Planned gift or endowment credit adjustment

If you claimed the planned gift tax credit on Schedule PG in 2006 or 2007, or are going to claim it for 2008, you must enter on this line the amount of the contribution on which the tax credit was based that you deducted in calculating your federal taxable income for 2008. This adjustment also must be made for a charitable contribution deduction passed through to you by a passthrough entity on which the entity calculated the North Dakota endowment fund tax credit, limited to the portion of the contribution deducted on your federal income tax return.

Line 6 -U.S. obligation interest

Enter the following on this line:

  • Interest income from U.S. obligations.
  • Interest income from other securities that is specifically exempted from state income tax by federal statute.
  • The portion of dividend income from a mutual fund attributable to investment in U.S. obligations and other securities the interest from which is exempted from state income tax by federal statute.

Common sources of interest income that may be entered on this line include:

  • U.S. savings bonds and Treasury bills and notes.
  • Securities issued by:

    Banks for cooperatives
    Commodity Credit Corporation
    Federal Deposit Insurance Corporation
    Federal Farm Credit System
    Federal Home Loan Banks
    Federal Intermediate Credit Banks
    Federal Land Banks
    Federal Savings & Loan Insurance Corporations
    Student Loan Marketing Association

Do not enter on this line interest income from securities of the Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), and Government National Mortgage Association (Ginnie Mae), nor from a federal income tax refund or repurchase agreement.

Line 7 -Net long-term capital gain exclusion

If your federal taxable income includes a net long-term capital gain (including a capital gain distribution from a mutual fund), you may exclude 30 percent of that gain from your North Dakota taxable income. However, if you were a full- year nonresident or part-year resident of North Dakota for the tax year, the exclusion is limited to a net long-term capital gain based on the capital gains and losses reportable to North Dakota.

Complete the worksheet on this page to calculate the amount to enter on this line.

Line 8 -Native American’s exempt income

If you are an enrolled member of a federally-recognized Indian tribe who lived on any Indian reservation in North Dakota for all of 2008, enter on this line income you derived from sources on any Indian reservation in North Dakota. Do not enter income derived from non-reservation sources in North Dakota. If you lived in North Dakota in 2008, but you did not reside on an Indian reservation for part or all of 2008, do not enter income earned or received while living off of the reservation.

Line 9 -U.S. Railroad Retirement Board benefits

Enter on this line unemployment, sick pay, or retirement benefits received from the U.S. Railroad Retirement Board that are included in federal taxable income.

Line 10 -Income from fi nancial institution

Enter on this line the amount of North Dakota income from a partnership, S corporation, or other passthrough entity subject to North Dakota’s financial institution tax under N.D.C.C. ch. 57-35.3. For more information, obtain the Income Tax Guideline: Adjustment For Income (Loss) From A Passthrough Entity Subject To N.D.C.C. ch. 57-35.3.

Line 11 -National Guard or reserve member exclusion

If you were a member of the North Dakota National Guard or the U.S. armed forces reserve, and you were mobilized or activated for federal active duty service under Title 10, United States Code, enter the compensation received for that service. Do not enter compensation exempted from federal income tax, nor compensation received for attending annual training, basic military training, or professional military education. Attach a copy of your Title 10 orders.

Line 12 -Servicemember Civil Relief Act adjustment

If you were a full-year nonresident of North Dakota for 2008, enter on this line the amount of your compensation received for active duty in the U.S. armed forces, or for active duty in the commissioned corps of the Public Health Service or the National Oceanic and Atmospheric Administration. If you were a part-year resident of North Dakota, only the compensation received for this service while a nonresident of North Dakota may be entered on this line. If you were a full-year resident of North Dakota for 2008, do not make an entry on this line. Attach a copy of the Form W-2 showing the military pay.

Line 13 -College SAVE contribution deduction

If you made a contribution in 2008 to a North Dakota College SAVE account administered by the Bank of North Dakota, you are allowed a deduction for the total contributions made during the year, up to a maximum deduction of $5,000 ($10,000, if married filing jointly). You are allowed the deduction regardless of whether you or someone else owns the account. A rollover of funds from another I.R.C. Section 529 college savings plan into a North Dakota College SAVE account does not qualify for the deduction.

Line 14 -Other subtractions

If you have any of the following subtraction adjustments, obtain and complete Schedule ND-1SA:

  • Renaissance zone income exemption (Schedule RZ)
  • New or expanding business income exemption under N.D.C.C. ch. 40-57.1
  • Human organ donor expense deduction
  • NEW! Employee workforce recruitment exclusion.

Enter on this line the total subtractions from Schedule ND-1SA, line 5. Attach Schedule ND-1SA.

Line 17 -Calculation of tax

If you were a full-year resident for the tax year, use the Tax Table on page 20 to calculate your tax. This also applies if you are married filing jointly and both you and your spouse were full-year residents for the tax year.

If you were a full-year nonresident or a part-year resident for the tax year, you must complete Schedule ND-1NR (in this booklet) to calculate your tax. This also applies if you are married fi ling jointly and either you or your spouse was a nonresident for part or all of the tax year.

Farm income averaging — If you have farm income and used Schedule J (Form 1040) to calculate your federal income tax for 2008, you may be able to lower your North Dakota income tax by completing Schedule ND-1FA. Obtain Schedule ND-1FA for more information.

Line 19 -Credit for income tax paid to another state

If you were a full-year resident or part-year resident of North Dakota and you paid income tax to another state on income also taxed by North Dakota, you may be eligible for an income tax credit. Obtain Schedule ND-1CR for more information. Attach Schedule ND-1CR.

Line 20 -Marriage penalty credit

You may be eligible for a tax credit if all of the following apply:

  • You are married and filing a joint return with your spouse;
  • Your joint taxable income on line 16 of Form ND-1 is more than $54,454;
  • Both you and your spouse have earned income. See “What’s included in earned income?” below; and
  • The earned income of the spouse with the lower earned income is more than $30,854.

Although you meet all of the above conditions, your fact situation may not produce a credit under the calculation formula prescribed by law. Complete the Marriage Penalty Credit Worksheet on page 12 to calculate the credit amount, if any, allowed to you.

What’s included in earned income?

For purposes of lines 3a and 3b of the worksheet, add the following amounts separately for you and your spouse:

  • Wages, salaries, tips, etc. reported on line 7 of Form 1040 or Form 1040A, or line 1 of Form 1040EZ;
  • Net self-employment income reported on line 3 of Schedule SE (Form 1040), reduced by the self-employment tax deduction reported on line 6 (short schedule) or line 13 (long schedule) of Schedule SE; and
  • Taxable portion of IRAs, pensions, annuities, and social security benefits reported on lines 15b, 16b, and 20b of Form 1040, or on lines 11b, 12b, and 14b of Form 1040A. Reduce this total by any taxable benefits from the U.S. Railroad Retirement Board entered on Form ND-1, line 9.

Line 21a -Unused 2007 residential and agricultural property tax credit

This line applies only if both of the following conditions are met:

  1. You had an unused residential and agricultural property income tax credit on your 2007 Form ND-1, page 2, line 24b, or 2007 Form ND-2, Tax Computation Schedule, line 6b; and
  2. You elected to use the unused 2007 credit on your 2008 return.

Important: DO NOT make an entry on this line if you elected on your 2007 return to receive a 2007 Property Tax Relief Certificate for the amount of your unused 2007 residential and agricultural property income tax credit.

If you elected to use your unused 2007 residential and agricultural property income tax credit on your 2008 return, enter that amount on this line.

Line 21b -Unused 2007 commercial property tax credit

Enter on this line the amount of an unused 2007 commercial property income tax credit, if any, from the 2007 Schedule PT, Section 2, line 10.

Line 21c -Other credits

If you have any of the following tax credits, obtain and complete Schedule ND-1TC:

  • Family member care credit (Schedule FC)
  • Renaissance zone credit (Schedule RZ)
  • Agricultural commodity processing facility investment credit
  • Seed capital investment credit
  • Planned gift credit (Schedule PG)
  • Biodiesel fuel supplier (wholesaler) credit
  • Biodiesel fuel seller (retailer) credit
  • Employer internship program credit
  • Microbusiness credit
  • Research expense credit
  • Angel fund investment credit
  • Endowment fund credit from passthrough entity
  • NEW! Workforce recruitment credit

Enter on this line the total credits from Schedule ND-1TC, line 14. Attach Schedule ND-1TC.

Line 22 -Commercial property tax credit

You may be eligible for an income tax credit if either (or both) of the following apply:

  • You owned commercial property located in North Dakota for which you were liable for the 2007 real estate tax or the 2008 mobile home tax; or
  • You were an owner of a passthrough entity, such as a partnership or S corporation, that owned commercial property located in North Dakota for which the entity was liable for the 2007 real estate tax or the 2008 mobile home tax.

See Schedule PT (in this booklet) for details. Enter the credit from Schedule PT, Section 2, line 9, on Form ND-1, page 2, line 22. Attach Schedule PT.

Lines 24a through 24c -Residential and agricultural property tax credit

Line 24a. You may be eligible for an income tax credit if both of the following apply:

  • You either (1) maintained a primary residence in North Dakota for the entire 2007 tax year or (2) established a primary residence in North Dakota during the 2007 tax year that you maintained until the end of that year; and
  • You owned residential or agricultural property located in North Dakota for which you were liable for the 2007 real estate tax or the 2008 mobile home tax.

See Schedule PT (in this booklet) for details. Enter the credit from Schedule PT, Section 1, line 6, on Form ND-1, page 2, line 24a. Attach Schedule PT.

Line 24c. If you have an unused residential and agricultural property tax credit (of at least $5.00) on line 24b, you must elect one of the following:

  • Carry over the unused credit and use it to reduce the income tax liability on your 2009 North Dakota income tax return. In this case, see the 2009 return when it is available for instructions on how to claim the unused credit on it; or
  • Request our office to send you a certificate for the amount of the unused credit, which you then submit to the county treasurer for any county in which you owned property subject to the 2007 real estate tax or the 2008 mobile home tax.

Fill in the applicable circle on line 24c to indicate your election.

Important: An election to receive a certificate for the amount of the unused credit must be made by the due date (or extended due date) of the original 2008 North Dakota return. If you file your return late, an election to receive a certificate is not valid, and the amount of the unused credit must be carried over to your 2009 return.

Line 26 -Withholding

Enter the North Dakota income tax withheld from a 2008 Form W-2, Form 1099, or North Dakota Schedule K-1. Also enter North Dakota income tax withheld from a 2007 North Dakota Schedule K-1 if the entity’s tax year shown on the Schedule K-1 is a fiscal year ending in your 2008 tax year. Be sure the state identified on the Form W-2 or Form 1099 is North Dakota. Attach a copy of the Form W-2, Form 1099, or North Dakota Schedule K-1.

Line 30 -Application of overpayment to 2009

If you have an overpayment on line 29, you may elect to apply part or all of it as an estimated payment toward your 2009 income tax liability. If you make this election, you may not change the election or the amount you applied after you file your return.

Line 31 -Voluntary contribution of overpayment

If you have an overpayment on line 29, you may make a voluntary contribution of part or all of your overpayment to the Watchable Wildlife Fund or the Trees For North Dakota Program Trust Fund (or both) by entering on the applicable line the amount you wish to contribute. If contributing, you must contribute at least $1.00. A contribution will reduce your refund.

Line 32 -Direct deposit of refund

If you want us to deposit your refund directly into your bank account, complete items a, b, and c. You may want to check with your bank to see if it will accept direct deposit and to obtain the correct routing and account numbers.

Routing number (Item a)—Enter your 9-digit routing number. The first two digits must be within the range of 01 through 12 or 21 through 32. See sample check above.

Account number (Item b)—Enter your account number. It may have up to 17 digits (both letters and numbers). Include hyphens, but omit special symbols. See sample check above.

Please note:

  • Do not use the number shown on a deposit slip for the routing or account number.
  • You will not receive notifi cation of when the deposit is made by our office. Contact your bank or check your bank statement to see if your refund has been direct deposited.
  • If the routing or account number is incorrect, or if your bank does not accept the direct deposit, a paper check will be issued.

Line 34 -Penalty and interest

Our office will notify you of any penalty and interest owed for late filing or late payment, or interest owed on tax due during an extension period. However, you may calculate the amount of penalty, interest, or both, that you owe and pay it with your return.

Penalty—Penalty is calculated as follows:

  • If you file your return on or before its due date (or extended due date), but you do not pay the full amount of the tax due on it, a penalty equal to 5% of the unpaid tax due or $5.00, whichever is greater, must be paid.
  • If you file your return after its due date (or extended due date), a penalty equal to 5% of the tax due or $5.00, whichever is greater, for the month the return was due plus 5% of the tax due for each additional month (or fraction of a month) during which the return remains unfiled, not to exceed 25% of the tax due, must be paid.

Do not include the check number as part of the account number.

Interest—Interest is calculated as follows:

  • If you have an extension of time to file your return and you file your return on or before its extended due date, and you have a tax due that you pay in full with your return, interest at the rate of 12% per year must be paid on the tax due from the original due date of your return to the earlier of the date you file your return or the extended due date.
  • If you do not pay the full amount of the tax due on your return on or before the due date (or extended due date) of your return, interest at the rate of 1% per month (or fraction of a month) must be paid on the unpaid tax due, starting with the month following the month in which the return was due and ending on the date the tax due is fully paid.

Enter the separate penalty and interest amounts, and the total of the two amounts, on the applicable lines.

Line 35 -Voluntary contribution

If you have a tax due on line 33, you may make a voluntary contribution to the Watchable Wildlife Fund or the Trees For North Dakota Program Trust Fund (or both) by entering on the applicable line the amount you wish to contribute. If contributing, you must contribute at least $1.00. A contribution will increase your balance due.

Line 36 -Balance due

The balance due (including the amount, if any, from line 37) must be paid in full with your return. Make your check or money order payable to the “ND State Tax Commissioner.”

Pay by credit card. You may pay the amount due on your return with your MasterCard®, American Express® Card, Discover® Card, or Visa® Card. To pay by credit card, call toll free or go to the web site of the credit card payment service provider shown below.

Link2Gov Corporation
1-888-ND-TAXES (1 -888-638-2937)
www.ndtaxpayment.com

A convenience fee will be charged to your credit card by Link2Gov Corporation for its services. The State of North Dakota does not receive any part of this fee. You will be told what the fee is during the transaction and you will have the option to continue or cancel the transaction.

Line 37 -Interest on underpaid estimated tax

If you were required to pay estimated North Dakota income tax for 2008, but you did not pay enough or you paid it late, interest is charged on the underpayment or late payment. To determine if you owe interest, obtain and complete the 2008 Form 400-UT.

Sign your return

Sign and date your return. If you are filing a joint return, both spouses must sign. An unsigned return is not a valid return and will be sent back to you. This may result in penalty and interest charges if you refile it after the due date.

Disclosure authorization. You may authorize the Office of State Tax Commissioner (Tax Department) to directly contact your tax return preparer to discuss your 2008 return by checking the box to the right of the signature area on the return. This allows the Tax Department to ask questions and request missing information needed to process your return. It also allows your preparer to respond to the questions and provide the requested information, to check on the status of your return’s processing (including a related refund or payment), and to respond to notices that you share with your preparer about math errors and return preparation.

(Note: The Tax Department will only send notices directly to you.)

This authorization only applies to the individual whose printed name and signature appear in the preparer’s signature area (and not to any firm). The authorization only applies to the return on which it is made, and it automatically expires on the due date (excluding extensions) for filing the 2009 return. The authorization does not allow your preparer to receive your refund check, to bind you in any way (including any additional tax liability), or to otherwise represent you before the Tax Department.

 

North Dakota Tax Help Links