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. It is important to note that penalty rules vary by tax type throughout North Dakota. Article 81-01.1 establishes general procedural standards unless a more specific statute or rule controls for a particular tax type, such as oil and gas or withholding taxes.
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. Abatement promotes 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. Requests must be submitted before any penalties or interest are paid—once those charges are paid, the right to pursue relief is forfeited.
It is essential to distinguish penalty abatement from tax forgiveness. Forgiveness would eliminate the underlying tax debt, which North Dakota rarely grants outside of 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. Taxpayers who need help estimating potential savings can use the IRS penalty abatement calculator as a general reference tool.
When a return is filed on time, but the associated tax remains unpaid, North Dakota assesses a one-time penalty of 5 percent of the unpaid tax, or $5, whichever is greater. The 5-percent-per-month structure that accumulates up to 25 percent applies when the return itself is filed late, and tax remains due. 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 in establishing eligibility for interest waiver.
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 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. Because oil and gas taxes have their own penalty mechanics that differ materially from the general income and sales tax rules, taxpayers in this category should review the applicable oil and gas reporting instructions in addition to the general provisions of Article 81-01.1.
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 guidance or suffering serious illness—so long as you can document the factors that led to the underpayment. For a broader look at how underpayment penalties work at the federal level, the Form 2210 underpayment of estimated tax guide provides useful context.
Under North Dakota Administrative Code 81-01.1-01-09, the good cause standard is defined specifically as a taxpayer who has been cooperative during the audit process and has a history of correct filing. This definition is narrower than the broad IRS-style "reasonable cause" standard and should not be conflated with it. While medical emergencies, natural disasters, and similar hardships may be raised in support of a waiver request, they are not independently sufficient under the code's stated definition—cooperation and filing history remain the central criteria.
Separately, the following timing rule applies: 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 act upon receiving an assessment notice before remitting penalty or interest amounts.
North Dakota law provides for automatic interest abatement when the Tax Commissioner misses certain statutory deadlines. These provisions apply to interest only—not to penalties—and the waiver covers the pro-rata amount of interest accrued from the deadline date to the actual issuance date.
If the Tax Commissioner issues a notice of determination later than 12 months after commencement of a field or office audit—subject to listed extensions and exclusions under the code—the interest waiver rule in ND Admin. Code 81-01.1-01-09(2) applies. The trigger is not simply that the audit was not finished within one year; rather, it is tied specifically to a late notice of determination issued after the 12-month period, with explicit exclusions. This provision ensures taxpayers are not penalized for internal delays and holds the agency to its own timelines.
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 waiver of interest—not a general penalty relief—on any unpaid taxes for which interest accrued after the deadline. This provision prevents your tax debt from growing due to administrative backlogs during the formal protest process.
After a taxpayer files a statement of grounds in the formal protest process, the Commissioner must issue a notice of reconsideration within nine months, plus any agreed extensions, under ND Admin. Code 81-01.1-01-08. If the office fails to meet this deadline, the code provides for waiver of interest—not a general rehearing right—covering the pro-rata interest accrued from the deadline to the actual issuance date. This provision applies within the formal protest and reconsideration procedure for notices issued under specified statutes, not as a standalone mechanism for challenging any penalty or interest assessment.
Medical Hardship — 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.
Natural Disasters — 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 could not comply on time.
Loss of Records — 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.
Erroneous Advice — 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.
Tax Problems Due To Preparer Error — 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. Employers facing related exposure should also review the risks outlined in the guide to penalties, audits, and collection risks for payroll tax in North Dakota, including potential trust fund recovery penalty exposure.
Financial Hardship (with Qualifiers) — While financial hardship alone usually does not justify abatement, when combined with other qualifying factors—such as illness or disaster—it can strengthen your case. Evidence of efforts to pay as soon as circumstances allowed bolsters credibility.
North Dakota typically denies abatement requests based on:
Simple forgetfulness or oversight — 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.
Lack of knowledge about tax requirements — 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 — 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 or declared disaster.
Reliance on another person's failure to file — North Dakota will generally deny abatement when a family member, employee, or preparer missed deadlines on your behalf. North Dakota typically requires that you exercise ordinary care and oversight over your own tax filings and payments.
Before drafting your request, review the "good cause" criteria under ND Admin. Code 81-01.1-01-09—specifically, whether you have a history of correct filing and were cooperative during any audit process. 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. If your tax situation involves both state and federal obligations, reviewing your IRS penalty abatement options at the same time can help you address both in a coordinated way.
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. The North Dakota Office of State Tax Commissioner website provides additional guidance on filings and current agency announcements.
Approval vs. Denial — 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 options for further review. For a Notice of Determination or Notice of Refund Change, North Dakota's formal protest process requires filing a Notice of Protest within 30 days of the decision (90 days if outside the United States) and a Statement of Grounds within 90 days. You may also request an informal conference or administrative hearing and, if still denied, petition the North Dakota District Court for judicial review. For a full overview of the process, see the guide to North Dakota tax appeals, your rights, and process. Be prepared to supply additional information if requested at any stage.
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 compile them into 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. Remember that North Dakota's good-cause standard focuses on audit cooperation and filing history, so frame your narrative around those criteria wherever possible.
North Dakota's process relies on a narrative letter without a prescribed form, allowing flexibility in presentation. In contrast, the IRS uses Form 843 for penalty abatement requests, which must be accompanied by a reasonable cause explanation. The IRS also permits reasonable-cause relief to be requested by phone in some cases; if it cannot be approved by phone, a written request using Form 843 is required. Note that IRS Form 656 is used exclusively for an IRS Offer in Compromise—it is not part of the IRS penalty abatement process and should not be confused with Form 843. The IRS process demands strict adherence to form instructions, whereas North Dakota focuses on the quality of your documentation and narrative.
North Dakota's good-cause standard, as defined in ND Admin. Code 81-01.1-01-09 centers on audit cooperation and a history of correct filing. The IRS reasonable-cause standard, by contrast, is broader and focuses more extensively on circumstances beyond the taxpayer's control across a wider range of factual situations. Tailoring your request to each agency's priorities—highlighting cooperation and filing history for North Dakota, and the specific circumstances for the IRS—improves your chances of success with each authority.
The North Dakota Office of State Tax Commissioner does not publish a standardized processing timeline for penalty abatement requests. Processing time will depend on the complexity of your case, the volume of documentation submitted, and any need for additional review. If you have not received a response within a reasonable period, contact the office at 701-328-7088 to inquire about the status. Record your inquiry dates and the name of the representative you spoke with as part of your correspondence file.
If you receive a Notice of Determination or Notice of Refund Change and wish to challenge it, North Dakota's formal protest process requires submitting a Notice of Protest within 30 days of the decision (90 days if you are outside the United States) and a Statement of Grounds within 90 days. 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. For a full overview of the formal process, review the guide to North Dakota tax appeals and your rights.
Yes. 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 or extraordinary circumstances. Itemize each assessed amount separately, explain the reason for the delay, and include evidence linking those causes to the charges you are seeking to have waived.
No official North Dakota source establishes an IRS-style First-Time Abatement program. All requests in North Dakota fall under the general "good cause" standard of ND Admin. Code 81-01.1-01-09, which centers on audit cooperation and a history of correct filing. Taxpayers with a strong prior compliance record who experience an isolated and well-documented setback—such as an unexpected illness—are more likely to succeed under this standard, even in the absence of a formal first-time abatement policy.
No. Paying penalties or interest before receiving a decision generally disqualifies you from relief for those amounts under the code's requirement that waiver requests be submitted before payment. 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 full tax balance, consider contacting the Office of State Tax Commissioner to discuss a payment plan or installment agreement. To assess whether a partial payment installment agreement may be appropriate for your situation, the PPIA eligibility calculator can help you evaluate your options. Be aware that official North Dakota collections guidance indicates penalties apply to late-filed returns and interest continues to accrue on unpaid balances until paid in full; a payment plan does not automatically stop these charges.
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 for each. Use headings or numbered sections to organize your request, making it easier for reviewers to follow and process the full scope of your tax debt relief request. Taxpayers who also need to address past federal filing obligations—such as a prior-year individual return or trust return—may find it useful to review the IRS Form 1040 2016 late amended filing guide or the guide on how to file federal Form 1041 for tax year 2022 alongside their state request.
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 the North Dakota Office of State Tax Commissioner website for up-to-date announcements and guidance. Taxpayers in other states facing similar collection pressures—such as a Louisiana final demand for payment notice—can find state-specific guidance through the relevant state relief pages.
If you do not 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. Other states offer comparable programs worth reviewing for context; for example, the Vermont tax relief programs page outlines how installment and relief options function in a similarly structured state tax system.
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