The North Carolina General Assembly recently enacted House Bill 998 which becomes effective for taxable years beginning on or after January 1, 2014. Under this new law, taxpayers may no longer claim a personal exemption for themselves, their spouse, children, or any other qualifying dependents. Additionally, many deductions and tax credits that impact North Carolina withholding tax are no longer available for tax years beginning on or after January 1, 2014.
As a result of this act, every employer must have all employees provide a new Employee’s Withholding Allowance Certificate, either Form NC-4 EZ or Form NC-4. The new form must be completed by the employee and provided to the employer so the correct amount of State income tax is withheld for any payment periods beginning on or after January 1, 2014.
The North Carolina Department of Revenue (NCDOR) requests that each employer work with their employees to determine which form (Form NC-4 EZ or Form NC-4) is most suitable for their filing preference:
- Form NC-4 EZ: The NCDOR anticipates this new, simpler form will likely suffice for most employees. Employees should use this form if they plan to claim the NC standard deduction and plan to claim no tax credits or only the credit for children, if they qualify to claim exempt status, or if they prefer not completing the extended Form NC-4. The NCDOR emphasizes that employees should understand Form NC-4 EZ can still be used even if they plan to itemize deductions for their tax filing.
- Form NC-4: Extended withholding form which may provide more precise withholding figures, but will require historical tax return information and estimation of 2014 income, deductions, and credits from the employee.
Please note that if an employee fails to provide the employer with the applicable updated form(s), the employer is required to withhold North Carolina tax based on the following status:
- Employees failing to file Form NC-4 EZ or Form NC-4 will be calculated as “Single” with no allowances.
The North Carolina withholding tax tables will be updated in Savers Admin’s payroll system to comply with the new rules. As the employer, your only role will be to ensure employees complete and submit the new form to you. If you are a Remote Client or a Web Client, you may change the information in Evolution, or feel free to send us the information and we will enter that for you. If you currently email, fax or mail payroll information to us, please send the completed forms to us and we will update the information in our payroll system for you.
Please consider subscribing to our blog: we will be posting more detailed instructions and practical advice for employers to ensure the requirement is met for all employees by 1/1/14 (click here for blog subscription instructions).
Questions or concerns? If you’d like additional information not available in this notice or on our blog, please feel free to contact us at firstname.lastname@example.org and ask to schedule a time for us to call you so we can address your specific questions about the new requirement and how it relates to your employees.