North Dakota payroll taxes: Your 2026 guide to staying compliant

Penalties for late filing or non-compliance and tips for staying organized

In North Dakota, failing to adhere to filing deadlines can result in a 5% penalty applied for each month or part of the month the return is not filed. This penalty can reach a maximum of 25% of the tax due. Interest is also charged at a rate of 12% per year on the unpaid tax from the original due date until it is paid in full. These tips can help keep you organized so you can pay on time:

Set reminders

Mark all payroll tax deadlines on your calendar, set reminders on your phone or computer, and use task management or payroll software tools to stay on top of due dates. 

Make electronic payments

Sign in to your Easy UI account on the Job Service North Dakota Unemployment Tax system to submit your unemployment tax withholdings and contributions. You’ll submit your state income tax withholdings via the North Dakota Office of State Tax Commissioner’s website.

Consider payroll software

Invest in reliable payroll software that automatically calculates taxes and reminds you of upcoming deadlines. You’ll minimize calculation mistakes and missed payments.

Outsource payroll

If managing payroll seems overwhelming, consider outsourcing to a reputable payroll service provider. They handle all tax calculations, filings, and payments on your behalf, ensuring compliance. 

Seek professional help

If you have any questions or concerns about payroll taxes, don't hesitate to consult with a tax professional or accountant. They can provide expert guidance and help you tackle the complexities of payroll tax compliance.

Payroll tax credits and incentives

In North Dakota, businesses can benefit from various tax credits and incentives designed to promote economic growth and encourage job creation. These programs not only support employers in managing their payroll costs but also aim to foster a thriving workforce in the state. By taking advantage of these offerings, businesses can enhance their financial stability while contributing to the local economy. Here are some of the credits and incentives available to North Dakota employers:

Federal Research and Development (R&D) Payroll Tax Credit

Eligible startups and small businesses can apply up to $500,000 per year of the federal R&D tax credit toward their employer portion of Social Security payroll taxes. This offset supports continued investment in research and innovation during early growth stages.

Federal Unemployment Tax Act (FUTA) Credit

Employers who pay their state unemployment insurance (SUI) taxes on time and in full may receive a FUTA credit of up to 5.4%, reducing the effective federal FUTA rate from 6.0% to 0.6% on the first $7,000 of wages per employee.

Work Opportunity Tax Credit (WOTC)

The WOTC allows you to reduce your federal tax liability by up to $9,600 for each new hire from certain targeted groups. This credit encourages employers to hire individuals who face significant barriers to employment.

Customized Employment/Supported Employment Tax Credit

The North Dakota Customized/Supported Employment Tax Credit is a state income tax credit designed to encourage employers to hire individuals with developmental disabilities or severe mental illnesses. This program helps individuals who face significant barriers to employment and incentivizes employers to create inclusive workplaces. The credit is 25% of up to $6,000 in annual wages per qualifying employee. It’s allowed in each tax year the employee is employed. 

New Jobs Training Program

The New Jobs Training Program in North Dakota provides financial assistance to businesses for training new employees in permanent full-time positions. The program is funded through the state income tax withholding generated by these new jobs. Businesses can access funds through loans, grants, or self-financing options. This initiative aims to support economic growth by equipping individuals with the skills needed for in-demand jobs within the state. 

Workforce Recruitment Credit

The Workforce Recruitment Credit is an income tax credit for employers in North Dakota who incur costs to recruit and hire employees for hard-to-fill employment positions within the state. It’s aimed at addressing the shortage of workers in North Dakota and incentivizing businesses to attract talent for high-paying, in-demand positions. The credit is 5% of the salary paid to the employee during their first 12 consecutive months of employment in the hard-to-fill position. 

Internship Employment Credit

The Internship Employment Credit is an income credit offered to employers who hire interns under a qualifying internship program within the state. This credit is designed to encourage businesses to establish internship programs and potentially help retain North Dakota college graduates in the state’s workforce. The credit is 10% of the stipend or salary paid to the intern. It can be claimed for up to five interns employed simultaneously. The lifetime cap is $3,000. 

Automation Tax Credit 

The Automation Tax Credit is a state income tax credit designed to encourage businesses to invest in machinery and equipment that automates manufacturing or animal agricultural processes within the state. Qualifying businesses must purchase or lease new or used automation equipment for manufacturing or animal agriculture in North Dakota. The automation must result in either improved job quality (5% increase in average wages or workplace safety) or increased output (5% increase in production). The credit is up to 15% of the cost or fair market value (for leases) of qualifying equipment. 

Research Expense Credit

The Research Expense Credit is a state income tax credit designed to encourage businesses to conduct qualified research in North Dakota. It is similar to the federal research and development tax credit but focuses specifically on expenses incurred within the state. The credit is 25% of the first $100,000 of excess expenses and 8% of expenses exceeding that amount. Special provisions apply for taxpayers who started qualified research before January 1, 2007, including a $2 million annual limit and specific rates for later years. 

Industries frequently benefiting from North Dakota business tax credits

• Manufacturing. Businesses involved in manufacturing can leverage the Automation Tax Credit for investments in machinery and other equipment used to automate manufacturing processes, aiming to improve job quality and increase output. 
• Agriculture and Agricultural Processing. The state offers an exemption on machinery and equipment used for agricultural processing, as well as an Agricultural Commodity Processing Facility Investment Tax Credit for investments in such facilities. This credit can also extend to livestock feeding, handling, or holding operations using byproducts from biofuel production facilities. 
• Research and Development. The Research Expense Credit incentivizes businesses to conduct research activities in North Dakota, with the credit amount dependent on the increase in qualified research expenses over a base period. Qualified R&D companies (meeting specific criteria) may even sell, transfer, or assign up to $100,000 of their unused tax credits. 
• Energy and Renewable Energy. North Dakota offers specific sales tax exemptions for machinery and equipment related to coal mining, electrical generating facilities (including coal-powered and other types), gas processing facilities, and oil refineries. The state also provides tax credits for producing or blending biodiesel or green diesel and for crushing soybeans or canola. Additionally, tax policy in North Dakota encourages investment in carbon capture and utilization, particularly for enhanced oil recovery, by reducing the differential between carbon storage and utilization tax credits. 
• Technology and Data Centers. Primary sector businesses, which can include technology-based businesses, may benefit from a sales tax and use tax exemption on computer and telecommunication equipment. A sales tax exemption is also available for information technology and computer software used by qualified data centers. 
• Tourism Development. Tourism businesses are recognized as a targeted industry for economic development and may qualify for incentives. 
• Small Businesses and Startups. Small businesses and startups, particularly those classified as primary sector businesses with revenue under certain thresholds and operating for a specified number of years, are eligible for various tax credits designed to foster growth and development, including those related to R&D, investment, and hiring. 

Consult with a tax professional to understand what tax credits and incentives you could apply to your business. 

Common payroll tax mistakes in North Dakota (and how to avoid them)

When it comes to managing payroll, small businesses in North Dakota face a variety of challenges, particularly with navigating payroll tax obligations. These common payroll tax mistakes can result in financial strain and administrative headaches. Let’s explore some of the frequent pitfalls that employers encounter in North Dakota and offer insights on how to avoid them. 

Misclassifying workers

Treating employers as independent contractors can trigger hefty penalties. Always correctly classify workers based on North Dakota’s specific labor laws. When in doubt, consult a tax professional. 

Missing deadlines

North Dakota has strict payroll tax filing deadlines. Late submissions result in penalties and interest. Set up automatic reminders and use payroll software to track due dates. 

Incorrect withholding calculations

North Dakota state taxes differ from federal guidelines. Use updated withholding tables and payroll systems that automatically calculate state-specific requirements. 

Failing to update employee forms

Outdated employee forms, such as W-4s or DE-4s, can lead to inaccurate withholdings. Review and update forms regularly, especially when employees experience life changes like marriage or new dependents. 

Miscalculating UI rates

Employers often overlook changes to unemployment insurance (UI) rates. Stay informed about rate updates, and apply them correctly to ensure compliance and avoid overpayments or underpayments. 

Poor recordkeeping

Maintain detailed payroll records for at least four years. Digital tools can help you track and store documents securely. 

Tip: QuickBooks Payroll can help you avoid these common mistakes by automating calculations, tracking deadlines, and keeping accurate records.

How to manage your small business payroll obligations 

Understanding the nuances of North Dakota's payroll taxes and regulations can take some time. Follow our small business tax preparation checklist and these steps to help you manage your payroll taxes.

Step 1. Partner with a tax professional

Consult a tax professional familiar with North Dakota’s payroll taxes and regulations. They can guide you through compliance requirements, tax nuances, and potential tax benefits for your business.

Step 2. Explore payroll software

Consider using payroll software to streamline your payroll processes. Tools like QuickBooks automate tax calculations, minimize errors, and ensure compliance with North Dakota laws.

Step 3. Proactively plan for compliance

Stay informed about North Dakota’s payroll tax deadlines and updates. Payroll software combined with expert guidance can help ensure you meet state requirements.

Step 4. Optimize your tax strategy

Work with your tax professional to uncover deductions, credits, or other incentives that could benefit your business. Leverage software reports to better understand your payroll data and identify opportunities for savings.

Step 5. Build a financially strong foundation

By combining expert guidance with the right tools, you can efficiently manage payroll taxes and focus on growing your business in the Peace Garden State.

What are the payroll taxes in North Dakota?

North Dakota’s payroll taxes include state income tax and unemployment insurance tax. Each tax has a specific rate. 

Calculating payroll taxes in North Dakota

Payroll tax calculations in North Dakota depend on several factors, including:

• Employee’s wages and taxable income
• Employer’s UI tax rate
• Federal, state, and local taxes

For employees, the main payroll taxes are: 

• State income tax
• Federal income tax
• FICA (Social Security and Medicare taxes)

For employers, the main payroll taxes are:

• Unemployment Insurance Tax (UI)
• Federal Unemployment Tax (FUTA)

To accurately calculate North Dakota payroll taxes, you can use the North Dakota Office of State Tax Commissioner’s website, payroll software configured with North Dakota-specific data, or consult a professional. These resources will help you calculate the specific amounts for your business and employees. 

It’s essential to stay updated on the current rates and regulations, as they can change annually.

Leverage payroll software for compliance in North Dakota

Managing payroll in North Dakota requires accuracy due to complex regulations. Errors can lead to penalties and legal risks, but QuickBooks streamlines payroll management to ensure compliance. It automatically calculates, files, and pays federal and state payroll taxes—with a 100% accuracy guarantee.** You'll stay current with North Dakota tax law changes, easily generate reports for filings, and get up to $25,000 in penalty coverage if issues arise.**

Disclaimer: 

**Accuracy Guaranteed: Available with QuickBooks Online Payroll Core, Premium, and Elite. We assume responsibility for federal and state payroll filings and payments directly from your account(s) based on the data you supply. As long as the information you provide us is correct and on time, and you have sufficient funds in your account, we’ll file your tax forms and payments accurately and on time or we’ll pay the resulting payroll tax penalties. Guarantee terms and conditions are subject to change at any time without notice.

Tax penalty protection: If you receive a tax notice and send it to us within 15 days of the tax notice we will cover the payroll tax penalty, up to $25,000. Additional conditions and restrictions apply. Only QuickBooks Online Payroll Elite users are eligible to receive tax penalty protection.

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