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EPY: Special Withholding Tax Status For North Dakota When NDW-R Claimed (Doc ID 2729049.1)

Last updated on NOVEMBER 18, 2020

Applies to:

PeopleSoft Enterprise HCM Payroll for North America - Version 9.2 and later
Information in this document applies to any platform.


Special Withholding Tax Status for North Dakota when NDW-R claimed

The fix that was delivered in PI #35 to copy the Federal Tax Status to State Tax Status when State Withholding Status is not exempted works appropriately when the federal tax status is None or Nonresident Alien.

It is not always correct if the federal tax status is Maintain Taxable Gross. The state of North Dakota has a reciprocity agreement with Minnesota and Montana. (Here is the link to the Form NDW-R:

Employees living in these states but working in North Dakota can submit a NDW-R form each year to claim the income tax reciprocity. The agreement allows the employees to have income taxes withheld for their state of residence rather than North Dakota. In this case, the employee will have two states set up in State Tax Data, one for North Dakota with the Non-Residency Statement Filed and UI Jurisdiction flags selected and the other for their state of residence with the Resident and Exempt from SUT flags selected.

In this case, the North Dakota row should have a Special Tax Status of None. This will allow the system to calculate the correct unemployment tax to be withheld for North Dakota. By having the Special Tax Status default to Maintain Taxable Gross if the status is Maintain Taxable Gross for federal, the system is calculating a taxable gross for both states. This is incorrect because they should only have a taxable gross for unemployment for North Dakota and a taxable gross for earnings for the state they reside in.

The issue can be reproduced with the following steps:
1. Insert a row on Federal Tax Data for "2020 or Later" to change the "Special Withholding Tax Status" to "Maintain Taxable Gross"
2. Indicate a resident state ie. "MN" and a UI Jurisdiction State of "ND" with the "Non-Residency Statement Filed" checked on
3. On the State "ND" row, the system is not allowing you to change the "Special Withholding Tax Status" to "None"




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