North Dakota has income tax reciprocity agreements with the states of Minnesota and Montana.
If you are a resident of North Dakota and maintain a permanent home in North Dakota to which you return at least once each month during the time you work in Minnesota, the compensation that you receive for personal or professional services performed in Minnesota is not taxable by Minnesota. Also, wages you receive for work performed in Montana while a resident of North Dakota are not taxable by Montana.
If you received wages covered by reciprocity and your employer withheld Minnesota or Montana income tax from them, you must file a nonresident income tax return with the applicable state to obtain a refund of the amount withheld.
The credit for taxes paid to another state is automatically calculated in your account when you add a Nonresident return to your already created Resident North Dakota return.
What do I need to do?
If you qualify for the reciprocal agreement, you will need to manually remove the automatic calculation. To do so, log into your account and create the North Dakota Resident return.
To Calculate North Dakota Tax: Go to the Basic Information and answer the residency questions. Select 'Blank Reciprocal Agreement' for the first question, "Are you a MN or MT resident filing a North Dakota return solely to claim a refund of North Dakota income tax due to reciprocity?" Then, after completing your North Dakota return entries, create a return for the nonresident reciprocal state.
If the other state is Minnesota, go to:
- State Section
- Minnesota Nonresident Return
- Basic Information
Select your state of residency. Continue to Residents of Michigan and North Dakota. Enter your taxable income as a positive number. (This number should match your federal taxable income. You can find this on your Summary/Print screen by clicking 'Show Details' for the Tax and Credits Section > Taxable Income.). Continue through the state return. To claim exempt from Minnesota withholdings in the future, file form MWR with your employer.
If the other state is Montana, go to:
- State Section
- Nonresident Montana Return
- Basic Information. Answer the residency question. To claim exemption from future withholdings, file form MW-4 with your employer.
NOTE: The nonresident returns will refund all or most of the taxes withheld. The resident return will calculate an amount owed (usually).