North Dakota Tax Update of 2013 Filing Season and Tips for Practitioners
The 2013 filing season got off to a slow start due to the federal delays, so we anticipate we will have more returns filed with extensions this year. As of April 10, 2013, our department has processed more than 300,000 individual income tax returns. While Efile continues to grow, we still see a fair number of paper returns. Technically, there are very few returns which you are unable to submit electronically. If you have any questions about how to electronically file a specific return, feel free to contact us for more information.
Here are some tips we would like to offer on what we have seen come through our E-file system that are either suspending returns for manual review or rejecting them back to the tax practitioner or the taxpayer:
- We implemented reject rules this year to ensure all information is being submitted with the e-filed return. Be sure and check the acknowledgements on what may be causing the return to reject. A list of the reject rules for all the income tax types is included in our Publication 1345ND North Dakota Electronic Filing Procedures that is available on our website at: http://www.nd.gov/tax/indincome/elecfiling/individual-income-tax-eros.html
- We now accept ACH Debit for return payments. This payment option is only available on E-filed returns and must be elected at the time the return is e-filed. We allow you to warehouse the payment until the due date. Payments on returns filed after the due date will not be warehoused.
- Schedule ND-1UT (Calculation of Underpayment of Estimated Individual Income Tax) – We required all professional software products to support this schedule this year as we have many returns erring out every year for failure to compute the UT interest. If your software product is not supporting the ND-1UT, you should still be able to compute the UT interest and enter it on the ND-1 directly. If you do not calculate UT interest for your clients when it should apply, the return will suspend in our system to review the UT interest and will either cause delays in issuing a refund, or we will bill your clients for the UT interest that wasn't computed.
- North Dakota Schedule K-1 withholding claimed on Individual tax returns – Withholding claimed on the Form ND-1 not matching the withholding documents (W-2, W-2G, 1099, ND K-1, etc.) is a re-occurring problem and the #1 reason we are rejecting the returns this year. All professional products are required to support the North Dakota Schedule K-1. We must have the pass-through entity information along with the ND income and withholding entered properly for the North Dakota return to be accepted. The entry location for this information differs by software vendors. We have alerted the vendors, such as Lacerte, to provide better instructions. Please check with your software vendor on the proper place to enter the North Dakota K-1 information.
- 1099-R North Dakota withholding claimed on Individual tax returns – A significant number of returns are suspending for ND withholding claimed from Forms 1099-R because the state distribution field (box 14) is not being completed. It is not sufficient to enter the federal gross distribution (box 1) and the taxable amount (box 2a). We realize some payers issuing the 1099-R do not always enter an amount in box 14, but if there is state tax withheld in box 12, the state code must be identified in box 13, and an amount entered in box 14.
- PDF Attachments – This is a new feature with Efile that allows schedules or other documents not supported for Efile to be attached to the e-filed return. Most of the software products support PDF attachments when e-filing the return. We encourage you to utilize this feature when you want to submit additional information with the return. This is especially useful for attaching documents supporting deductions or credits claimed, and some of the lesser used schedules (ND-1QEC, ND-1FC, ND-1PG, and ME). Fillable PDFs of all of our forms can be found on our website.
- We also accept electronic returns, even if the federal return is unable to be filed electronically. This can be done by submitting an unlinked (state-only) return. This will allow you to transmit the state return while bypassing the validation of the federal return.
- Invalid mailing addresses – This is a constant problem. Simple mis-spellings and use of non-deliverable addresses can suspend a return and delay a refund for up to 6 weeks. We require a current and valid "mailing" address on all returns before a refund can be issued, including direct deposits. If your clients have a p.o. box, that should be used if mail is not delivered to their physical home address.
- Returns submitted on paper instead of e-filed – Be sure to include all withholding documents (W-2, W-2G, ND K-1, 1099-G, etc.) in addition to the Schedule WTH with the North Dakota return. The Schedule WTH is used only to assist in keying the withholding information from the paper forms. It does not replace the requirement to attach the paper withholding documents. Missing documents will cause delays in processing and may result in sending the return back as incomplete or sending a letter to the taxpayer for the information.
We are committed to do what we can to help make the electronic filing of your clients' returns with our office as smooth as possible. If you have any questions regarding electronic filing, you can send an email to firstname.lastname@example.org, or contact Donna Kohler, at 701.328.3102 for tax-related questions, or Lucas Asche at 701.328.3129 for technical questions.