Hibou Odoo Suite Enterprise: State of North Carolina: Filing State Income Taxes, W2s, and 1099s.

Purpose

The purpose of this documentation is to outline the processes and requirements associated with filing state income taxes as well as how to file W-2s and 1099s, if needed, in the state of North Carolina.

State Income Tax Withholding 

Employees should complete either a NC-4EZ Employee's Withholding Allowance Certificate or NC-4 Employee's Withholding Allowance Certificate. 

You may use Form NC4-EZ if you plan to claim either N.C. Standard Deduction or N.C. Child Deduction Amount (but no other N.C. deductions), and you do not plan to claim any N.C. tax credits. Otherwise, use form NC-4.

If an employee does not give you a completed Form NC-4 or Form NC-4 EZ, you must withhold tax as if the employee is single with zero withholding allowances. A certificate filed by a new employee is effective upon the first payment of wages thereafter and remains in effect until a new one is furnished unless the employee claimed total exemption from withholding during the prior year.   

You are not required to determine whether the total amount of allowances claimed is greater than the total amount to which the employee is entitled. However, you should immediately advise the North Carolina Department of Revenue if you believe that the amount of allowances claimed by an employee is greater than the amount to which such employee is entitled.

Although no longer required by the IRS, North Carolina requires an employer to submit copies of any certificates (Form NC-4 or Form NC-4 EZ) on which the employee claims more than 10 withholding allowances or claims exemption from withholding and the employee’s weekly wages would normally exceed an amount equal to the North Carolina standard deduction for an individual with a filing status of single divided by 52.

For example, for the tax year 2020, the weekly wage amount would be $192 (standard deduction for a single individual is $10,000 divided by 52 = $192). Retain the original certificate in your files.

If an employee’s withholding allowances should decrease, requiring more tax to be withheld, the employee is required to provide an amended certificate within 10 days after the change. If the allowance increases, requiring less tax to be withheld, the employee may provide an amended certificate any time after the change.

Additional withholding allowances may be claimed by taxpayers expecting to have allowable itemized deductions exceeding the standard deduction or allowable adjustments to income. One additional allowance may be claimed for each $2,500 that the itemized deductions are expected to exceed the standard deduction and for each $2,500 of adjustments reducing income. If an employee will be entitled to a tax credit, he may claim one additional allowance for each $134.

To increase withholding, an employee may claim fewer allowances or may enter into an agreement with his employer and request that an additional amount be withheld by entering the desired amount on Line 2 of Form NC-4 or Form NC-4 EZ or Line 3 of Form NC-4 NRA.

State Income Tax Withholding Reporting & Deposits 

FrequencyMonthly income tax withholding (average)Due Date
Quarterly Less than $250The last day of the month following the end of the calendar quarter. (Form NC-5)
Monthly At least $250 but less than $2,000The 15th day of the month following the month in which the tax was withheld (except the return and payment for the month of December which is due by January 31). (Form NC-5)
Semiweekly$2,000 or more
Payments: When you remit your payments to the IRS for Income Taxes and FICA, you should also remit payment to the state of North Carolina for those same wages. (Form NC-5P)

Filing: You reports are due Quarterly on the last day of the month following the close of the quarter. (Form NC-5Q)

You can file your North Carolina withholding return and pay the tax online at the Department of Revenue’s E-File System.  

To  create paper returns and payment vouchers, visit the NCDOR: Withholding Tax Forms and Instructions page.

Annual Withholding Reconciliation, W2s, and 1099s

Form NC-3, Annual Withholding Reconciliation, and the State’s copy of each Form W-2, Form NC-1099PS, Form NC-1099-ITIN, Federal Form 1099-MISC, and Federal Form 1099R must be filed online through NCDOR eServices on or before January 31st for the preceding calendar year.

During the calendar year, if you terminate your business or permanently cease paying wages and non-wage compensation subject to North Carolina income tax withholding, Form NC-3 and the required W-2 and 1099 statements must be filed within 30 days of the last payment of wages or non-wage compensation. 

See the North Carolina Department of Revenue website for details and instructions on filing your Form NC-3, Form NC-3X, and the required W-2 and 1099 statements.

For further details, see the 2020 Income Tax Withholding Tables and Instructions for Employers.