North Carolina updates employers on withholding changes

North Carolina has issued a notice with several updates on withholding provisions.

Changes Applicable to Withholding for Tax Year 2015. The changes affect the manner in which Form NC-3 and the Department’s copies of W-2s, 1099s and other withholding statements are filed and when they are due. The changes are effective for taxable years beginning on or after January 1, 2015. For tax year 2015, the changes apply only to informational returns required to be filed in 2016. The law requires Form NC-3 and copies of withholding statements to be filed on or before January 31 of the succeeding year and in an electronic format. To implement the law, the Department is currently developing three new electronic filing (eNC3) options for taxpayers: (1) file upload, (2) bulk transmittal, and (3) online entry. These new methods will replace the current options of filing via CD or paper. The Department has established a web page (www.dornc.com/enc3) to provide information about the electronic filing of Form NC-3 and the Department’s copies of withholding statements.

Changes Applicable to Withholding for Tax Year 2016. North Carolina requires income tax to be withheld from wages at a rate that is 0.1% higher than the individual income tax rate. The individual income tax rate remains at 5.75% for tax year 2016, therefore the withholding rate on wages will be 5.85%. The change is effective for taxable years beginning on or after January 1, 2016. The revised withholding tables for wages paid in 2016 will be included in Form NC-30, 2016, Income Tax Withholding Tables and Instructions for Employers, available later this year at: www.dornc.com/downloads/wh_forms.html. The law also increased the standard deduction for each filing status, effective for taxable years beginning on or after January 1, 2016.

A new penalty, $50.00, has been enacted and is effective for taxable years beginning on or after January 1, 2016. However, for tax year 2016 the penalty only applies to informational returns required to be filed in 2017.

Changes Applicable to Withholding for Tax Year 2017. The individual income tax rate has been lowered from 5.75% to 5.499%. This change is effective for taxable years beginning on or after January 1, 2017. The withholding tables will be revised for 2017 to reflect the reduced tax rate. During Tax Year 2017, the withholding tax rate will be 5.599%. (NCDOR Important Tax Law Changes For Employers, Pension Payers, And Others That Withhold North Carolina Income Tax, October 28, 2015.)

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