Employees must complete new tax form by Dec. 31
by Anna Oakes
Employees across the state are being asked to update their tax information by the end of the year because of tax law changes enacted by the General Assembly.
Employees must provide a new Employees Withholding Allowance Certificate (either Form NC-4 or NC-4 EZ) to their employers by the end of the year so that the correct amount of state income tax will be withheld for any payment periods beginning on or after Jan. 1, 2014. Form NC-4P is required for recipients of pension or annuity payments.
The General Assembly this year passed House Bill 998, the Tax Simplification and Reduction Act, which reduced state personal and corporate income tax rates. The personal income tax will be reduced to a flat 5.8 percent in 2014 and 5.75 percent in 2015, eliminating the former three-tiered system that ranged from 6 percent to 7.75 percent.
It also increased the standard deduction for all taxpayers by 250 percent beginning in 2014, according to information presented by fiscal research tax analyst Cindy Avrette at a Dec. 10 Revenue Laws Study Committee meeting in Raleigh. At least 40 tax exemptions, deductions or credits were repealed or allowed to sunset.
Taxpayers may no longer claim a personal exemption for themselves, their spouse, children or any other qualifying dependents. As a result, most taxpayers will claim zero allowances on their withholding forms, Avrette's presentation noted. Those who may want to claim allowances on the NC-4 or NC-4 EZ include taxpayers claiming the child tax credit, itemized deductions or non-withholding income from other sources, it said.
Only two itemized deductions will be allowed for state tax purposes in tax year 2014: home mortgage interest and property taxes, capped at $20,000, and charitable contributions. Other personal income tax deductions retained include the standard deduction, child credit, the deduction for "Bailey" retirement income and the deduction for Social Security income.
Personal tax preferences eliminated by House Bill 998 include the Earned Income Tax Credit and credits or deductions for adoption-related expenses, long-term care insurance premiums, childcare expenses, education expenses, non-itemed charitable expenses and retirement income.
Taxpayers who inaccurately estimate their personal tax liabilities by entering the incorrect number of allowances on the withholding form could receive a large tax refund or owe additional taxes when they file 2014 returns in 2015.
If an employee does not submit a new NC-4 by the end of the year, the employee will be classified as single with no allowances, meaning the maximum amount will be withheld from each paycheck.
For more information about the NC-4, including a list of frequently
asked questions, visit http://www.dornc.com/press/2013/nc4requirement.html. Employers
or pension payers with questions may call 1-877-252-4487.