North Dakota Income Tax Withholding Rates and Instructions
Learn to manage the North Dakota income tax withholding process. This guide covers an employer's responsibilities for accurate and compliant payroll.
Income tax withholding is a system where employers deduct a portion of an employee’s wages and remit it directly to the government. This process ensures that income taxes are paid gradually throughout the year, rather than in a single, large sum. The amount withheld is an approximation of the employee’s annual tax liability, which is reconciled when the individual files their annual income tax return.
Required Employee Withholding Forms
To establish the correct amount of state income tax to withhold, employers in North Dakota use the federal Form W-4, “Employee’s Withholding Certificate,” as the state does not have its own specific form. This is the standard form employees complete to inform their employer of their tax situation.
The Form W-4 requires an employee to provide their filing status, such as single or married filing jointly. The form also allows for the declaration of dependents and other adjustments to calculate the appropriate withholding amount. An employee must complete this form accurately and submit it to their employer upon starting a new job or when their personal or financial situation changes.
Non-residents who perform services within North Dakota also use the federal Form W-4 to determine state withholding. If an employee fails to submit a Form W-4, the employer is required to withhold taxes at the highest rate, which is single with no adjustments.
Determining North Dakota Withholding Amounts
After an employee submits a Form W-4, the employer calculates the North Dakota income tax to withhold from each paycheck. The state provides two methods for this calculation: the Wage Bracket Method and the Percentage Method. Both are detailed in the “Income Tax Withholding Rates and Instructions” publication from the North Dakota Office of State Tax Commissioner.
The Wage Bracket Method involves finding the employee’s wage range for the pay period in tables provided by the state. The employer locates the row for the employee’s wages and the column for the filing status and dependents claimed on Form W-4. The intersection of this row and column shows the exact amount of tax to withhold.
The Percentage Method requires the employer to determine the value of the adjustments claimed by the employee. This adjustment value is subtracted from the employee’s gross wages for the pay period. The resulting figure is used with the state’s percentage-based tax rate schedules to compute the withholding amount based on the employee’s filing status.
Employer Filing and Payment Obligations
Employers must remit withheld income tax to the North Dakota Office of State Tax Commissioner by filing Form 306, the “Income Tax Withholding Return.” This process involves adhering to a set payment schedule. This form must be filed even if no wages were paid during a specific reporting period.
The filing frequency for Form 306 depends on the total tax withheld. Employers who withheld $1,000 or more in the previous calendar year are required to file quarterly. Those who withheld less than $1,000 may be permitted to file annually, and due dates for quarterly filers are the last day of the month following the end of the quarter.
Electronic filing and payment through the state’s online portal, the Taxpayer Access Point (TAP), is required for employers withholding $1,000 or more in the prior year. In addition to periodic filings, employers must submit an annual reconciliation using Form 307, the “North Dakota Transmittal of Wage and Tax Statement,” with copies of employee W-2s, by January 31 of the following year.
Special Withholding Situations
For supplemental wages, such as bonuses, commissions, and overtime pay, North Dakota allows employers to use a flat 1.5% withholding rate. This simplifies the calculation for payments made outside of the regular payroll cycle.
State income tax withholding on distributions from pensions and annuities is voluntary. For withholding to occur, the recipient must make a specific request to the payer for a set dollar amount to be withheld from the payments.
Similarly, withholding state income tax from payments to non-resident contractors or entertainers is not required. This is a voluntary arrangement that can be made if the recipient requests it and the payer agrees.