North Dakotans will get a reduction in their 2021 state income taxes through an appropriation voted by the Legislature last fall.
Claiming the $350 credit for individuals or $700 for those filing jointly is “very simple,” said state tax commissioner Brian Kroshus. It appears as a line item on the form used by most North Dakotans.
“This is going to significantly reduce the number of North Dakota taxpayers who will have to make a payment,” Kroshus said.
The bill will create an estimated $211 million in income tax relief over the next two years. Some 300,000 North Dakotans will have no state income tax bill, and another 200,000 will see a reduction. Income tax relief was pushed hard by Gov. Doug Burgum, who recommended using a portion of the state’s $1.1 billion closure fund balance in the last cycle two-year budget to provide tax relief to residents.
The credit cannot create a negative tax debt. For example, if a person owes $450, the credit will reduce that amount to $100. If he owes $250, this will remove his obligation to pay, but will not reimburse him $100.
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The state income tax rate is one of the lowest in the country, Kroshus said. While this may create a payment situation for some taxpayers, this is less likely with the appropriation passed at the Special Session last November.
Early electronic filing is the best way to speed up a refund and avoid fraud, the commissioner said. Just over 85,000 state tax returns had been filed by Feb. 18, putting the state just ahead of last year’s pace. Almost all were filed electronically. Last year, 90% of the 480,000 returns filed in the state were filed electronically. The deadline for filing this year is April 18.
The most common errors made on state returns aren’t related to math or tax laws, Kroshus said. Typographical errors in an address, name, or social security number are the most common cause of delays.
Income tax in the state’s 2021 fiscal year generated more than $465 million, or about 14.5% of total general fund revenue of $3.2 billion. Kroshus expects the number of returns filed in 2022 to be close to 500,000 as the state’s population has grown.
Most people who file a federal tax return should receive a refund, according to IRS spokesman Anthony Burke.
Electronic filing allows the preparer – whether a professional doing it for a client or someone doing their own – to focus on entering accurate information, because the tax software does all the math.
“We find e-filing to be inherently more accurate than trying to do it yourself,” Burke said.
A taxpayer who cannot file a return by the deadline must request an extension, even if a refund is due. If the taxpayer has a balance owing, it is safest to submit an estimated payment with the extension.
“An extension only extends the filing deadline, not the payment deadline,” Burke said.
The taxpayer would avoid paying a penalty on the total amount owing by submitting an estimated amount. If the estimate is wrong, any penalty would only apply to the difference.
Separate requests must be made for state and federal extensions.
At the state level, Kroshus advises estimating on the high side to avoid any penalty. The taxpayer will not lose money by doing so. Any difference would be refunded or could be applied as an advance payment for the following tax year.
“It’s not money they won’t see again. It’s just how it’s applied in the future,” he said.
Preparing for an accurate return begins with collecting all of the documents, according to the IRS website. In addition to income-related documents such as W2s and 1099 forms, child tax credit and economic impact payment letters — 6419 and 6475, respectively — contain important information for a 2021 tax return. .
As of Feb. 11, the IRS has processed more than 23 million returns and issued more than $20 billion in refunds. The average refund is around $2,300, according to the service’s website.
Contact Travis Svihovec at 701-250-8260 or [email protected]