North Dakota taxpayers who fail to meet their state income or sales tax obligations may be subject to penalties and interest, resulting in increased tax liabilities and potential enforcement actions. The Office of State Tax Commissioner may initiate collection measures—including bank levies, wage garnishments, or property liens—when required filings or payments are not completed by the legal deadline. However, under qualifying circumstances, taxpayers may request penalty abatement, a process designed to reduce or eliminate these additional charges when noncompliance was due to factors beyond the taxpayer’s control.
Under North Dakota Administrative Code 81-01.1-01-09, the State Tax Commissioner can waive all or part of the penalties and interest assessed against eligible taxpayers who demonstrate "good cause." Unlike the Internal Revenue Service’s structured process, North Dakota’s approach permits applicants to submit a narrative request detailing their compliance history, the circumstances surrounding the noncompliance, and supporting documentation. When approved, penalty abatement may help prevent further enforcement actions and expedite the resolution of outstanding tax liabilities.
This guide outlines the qualifications, procedural requirements, and documentation standards for requesting penalty abatement in North Dakota. It explains which types of penalties—such as those related to late filings, withholding taxes, or underpayments—are eligible for waiver, how to prepare and submit a request, and how to coordinate penalty relief with installment agreements or payment plans. Whether the applicant is an individual taxpayer, wage earner, or small business owner, this resource provides the necessary framework to seek administrative relief and achieve compliance with state tax law.
Penalty abatement refers to the reduction or elimination of extra charges—beyond the core tax owed—that accrue when taxpayers miss filing or payment deadlines. While the principal tax liability remains due, penalties and interest can significantly inflate debts. Abayour debts fairness in enforcement by recognizing honest mistakes or circumstances beyond your control, thereby preventing undue financial hardship.
The authority for penalty relief in North Dakota is found in Administrative Code 81-01.1-01-09, which provides that “all or part of the penalty and interest may be waived for good cause upon request.” This statute empowers the State Tax Commissioner to evaluate each request on its merits, considering your history of compliance, cooperation with the agency, and the reasons for your non-compliance.
It’s essential to distinguish penalty abatement from tax forgiveness. Forgiveness would eliminate the underlying tax debt, which North Dakota rarely grants outside limited hardship provisions. Abatement only removes additional charges—penalties and interest—while the base amount of tax remains due. This approach maintains the tax system's integrity while providing targeted relief for penalties.
North Dakota imposes a penalty of 5 percent per month (or $5, whichever is greater) for returns filed after the original due date, up to 25 percent of the tax due. If you demonstrate reasonable cause, requesting an abatement can reduce this surcharge, potentially saving you significant sums on income, sales, or withholding taxes.
When you pay after the due date, the state assesses a 5 percent penalty (or $5 minimum) each month, capped at 25 percent of the tax owed. If unexpected financial hardship or other qualifying factors prevented timely payment, you can seek relief to lower or eliminate these charges, helping you manage your overall tax debt more effectively.
Interest accrues at 1 percent per month (12 percent annually) on any unpaid tax balance, with no statutory cap. Although interest relief is more difficult to secure than penalty abatement, you may qualify if delays by the Tax Commissioner or extraordinary circumstances caused your non-payment. Demonstrating agency delays—such as missed audit deadlines—can be especially persuasive.
When oil and gas tax returns are not filed on time, a $25 daily penalty applies for each well or drilling unit. There is no specified maximum, so that penalties can accumulate rapidly. In cases of declared disasters, loss of records, or other valid good-cause reasons, the Commissioner may abate some or all of these penalties.
North Dakota charges 12 percent annual interest on underpaid estimated tax installments. Limited abatement may be available if you missed payments due to reasonable cause—such as relying on erroneous IRS guidance or suffering serious illness—so long as you can document the factors that led to the underpayment.
To qualify for penalty and interest relief, you must meet North Dakota’s “good cause” standard, which includes:
A record of timely filings and payments strengthens your case.
Demonstrating full cooperation during audits or inquiries shows your intent to comply.
You must prove that circumstances beyond your control—like hospitalization, natural disaster, or agency delays—led to the late filing or payment, rather than willful neglect.
Your request for abatement must be submitted before any penalties or interest are paid. Once you pay these charges, you forfeit the right to pursue relief, so it is critical to file the assessment notice.
ND law provides for automatic interest abatement when the Tax Commissioner misses statutory deadlines, including:
When the Tax Commissioner does not finish your audit within one year of its start date, North Dakota law requires that interest accruing after the 12-month deadline be automatically waived. This trigger ensures you aren’t penalized for internal delays and holds the agency to its timelines, preventing unnecessary growth of your unpaid tax balance.
When you file a statement of grounds challenging an assessment, the Tax Commissioner must provide a written response within ninety days; failure to meet this deadline triggers automatic interest relief on any unpaid taxes accrued thereafter. This automatic penalty relief ensures the appeals process moves forward promptly and prevents your tax debt from ballooning due to administrative backlogs.
If you request reconsideration of a penalty or interest assessment, North Dakota’s Administrative Code requires the office to issue its notice within nine months. After this period, interest on your state tax liability is automatically abated, safeguarding taxpayers from additional charges caused by delayed agency action and supporting compliance with due-process requirements.
If the agency’s delay caused additional interest accrual, those portions must be waived automatically under the Administrative Code.
Serious illness, hospitalization, or incapacitation affecting you or an immediate family member can justify abatement. Provide medical records, doctors’ letters, and doctors’ notes to show how the condition prevented timely filing or payment.
Floods, fires, tornadoes, and other declared disasters can disrupt your ability to meet tax deadlines. Official disaster declarations, insurance claims, and photographs documenting damage help establish that you couldn’t comply on time.
You may qualify when necessary tax records are destroyed by theft, fire, flood, or other circumstances beyond your control, and you cannot reconstruct them before the filing deadline. Submit police or fire reports, affidavits, and any partial documentation you can gather.
If you relied on written guidance from a division director or section supervisor at the Tax Commissioner’s office and that advice proved incorrect, you may seek relief. Include actual correspondence and show how you followed the guidance to your detriment.
Mistakes by your tax professional may be acceptable if you exercised ordinary care in selecting and supervising the preparer. Provide engagement letters, fee statements, and communications demonstrating your oversight.
While financial hardship alone usually doesn’t justify abatement, combined with other factors that fit, such as illness or disaster, it can help your statements and evidence of efforts to pay as soon as possible bolster credibility.
North Dakota typically denies abatement requests based on:
Absent-minded errors—like forgetting a filing deadline or misplacing a payment notice—do not meet North Dakota’s “good cause” standard. Taxpayers cannot use mere oversight to qualify for penalty abatement or penalty relief on unpaid taxes.
Claiming you were unaware of income tax or sales tax rules—such as filing requirements—does not justify abatement. The State Tax Commissioner expects taxpayers and businesses to understand basic compliance obligations, even if they face other tax problems.
Financial hardship alone does not automatically trigger relief, even if you cannot fully pay your state tax debt. To be eligible for an interest or penalty waiver, you must demonstrate circumstances beyond lack of funds, such as a medical emergency.
If you are a North Dakota resident, North Dakota will generally deny abatement to a family member, employee, or preparer who missed deadlines. North Dakota typically requires that you exercise ordinary care and oversight over your tax filings and payments.
Before drafting your request, review the “good cause” criteria, examine your compliance history, and confirm that your specific circumstances align with acceptable reasons. Gather preliminary documentation—such as medical records or disaster declarations—to support your case.
Your letter should include the following elements:
Mail your request and supporting documents to:
Office of State Tax Commissioner
600 E. Boulevard Ave., Dept. 127,
Bismarck, ND 58505-0599
You may also call 701-328-7088 to inquire about electronic filing or fax options. After submission, retain copies of everything, note the date sent, and track any follow-up communications.
If approved, you will receive written notification specifying which penalties and interest were abated. If denied, the notice will explain the reasons and outline your appeal options—filing a protest within 30 days, requesting an administrative hearing, or petitioning in district court. Be prepared to supply additional information if requested.
Create a clear timeline that connects events to missed deadlines. Label each document—medical records, disaster declarations, correspondence—and arrange them in chronological order or a digital PDF to ensure the reviewer can follow the sequence of events and understand how each piece of evidence supports your good-cause claim.
Avoid submitting vague statements unsupported by documentation, including irrelevant or excessive materials that obscure the key points. Do not fail to explain how each document directly relates to the cause of your non-compliance. Always tie your evidence to specific dates and events to make a compelling, organized case.
North Dakota’s process relies on a narrative letter without a prescribed form, allowing flexibility in presentation. In contrast, the IRS requires Form 843 for penalty abatement, Form 656, and a reasonable cause explanation. The IRS process demands strict adherence to form instructions, whereas North Dakota focuses on the quality of your documentation and narrative.
While both systems consider circumstances beyond the taxpayer’s control, North Dakota emphasizes cooperation with tax authorities and a history of compliance, which narrows its focus to the specific facts that prevented timely filing or payment. Tailoring your request to each agency’s priorities—highlighting cooperation for ND and circumstances for the IRS—improves your chances of success.
North Dakota typically reviews straightforward abatement requests within 30–45 days of receipt. Complex cases involving multiple tax years, extensive documentation, or additional agency review can extend processing to 60 days or more. If you haven’t heard back after 45 days, call 701-328-7088 to check the status. Record your inquiry dates and who you spoke with for your “good cause” cooperation file.
You may protest a denial within 30 days of the decision notice by submitting additional evidence or clarification to the Office of State Tax Commissioner. After filing your protest, you can request an informal conference or administrative hearing and, if still denied, petition the North Dakota District Court for judicial review. Throughout, maintain clear communication and provide timely documents.
Absolutely. Under ND Admin Code 81-01.1-01-09, you can seek relief for assessed penalties and accrued interest in the same request. Penalties are more commonly abated, while interest relief requires more substantial proof—such as documented agency delays. Itemize each itemized amount, explain the reason for the delay, and include evidence linking those causes to the charges.
North Dakota has no formal First-Time Abatement program. Instead, all requests fall under the “good cause” standard. Taxpayers with a timely compliance history often receive relief, like an IRS filing waiver, when they experience an isolated error, like an unexpected illness. Highlight your prior compliance record and the unique circumstances that strengthen your case.
No, paying penalties or interest before receiving a decision generally disqualifies you from relief for those amounts. Instead, pay any underlying tax liabilities to avoid further interest on the principal, and delay the penalty and interest payments until after the abatement decision. If you cannot pay the tax, consider registering for an installment agreement to prevent additional penalties while maintaining your eligibility for abatement.
Yes, you can include multiple tax years and various tax types—income, sales, withholding, oil & gas—in a single letter. Include each period and tax type in your narrative and provide supporting documentation. Use headings or numbered sections to organize your request, making it easier for reviewers to follow and process your entire tax debt relief at once.
When North Dakota or the federal government declares a disaster, the Tax Commissioner often waives late-filing penalties, reduces interest, or extends deadlines for affected taxpayers. To qualify, reference the specific disaster declaration in your letter and include documentation—FEMA reports, insurance claims, or photos—showing you were directly impacted. Monitor tax.nd.gov for up-to-date announcements and guidance.
If you don’t meet the “good cause” standard, you can explore other relief options—such as an installment agreement or payment plan—with the North Dakota Office of State Tax Commissioner. These plans allow you to pay your tax debt over time, often with lower monthly payments. Contact 701-328-7088 to discuss a payment plan or other tax relief programs available to help you avoid liens or garnishments.
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