North Carolina updates withholding booklet; no new tables

North Carolina has updated its withholding tables publication.

Child tax deduction.

During the 2017 legislative session, the state converted North Carolina’s child tax credit to a child deduction. The new “Child Deduction Amount” varies based on a taxpayer’s filing status and adjusted gross income (AGI). The “Child Deduction Amount” expands the number of taxpayers who may benefit by increasing the AGI limits and by providing five deduction amounts, as opposed to the current two credit amounts. The changes did not result in revisions to the formula tables for the percentage method withholding computations, formula tables for annualized method withholding computations, or the wage bracket tables.
The conversion of the child tax credit to a child deduction required adjustments to the allowance table for Form NC-4EZ, and the allowance worksheets for Forms NC-4, NC-4 NRA, and NC-4P. Employers are not required to obtain a new Form NC-4, NC-4EZ, or NC-4P from each employee or pension recipient because of the conversion of the child tax credit to a child deduction; however, be aware that an employee or pension recipient could either be entitled to an additional allowance or lose an existing allowance because of this law change. Employers may want to inform their employees or pension recipients of the repeal of the child tax credit and the enactment of the new child deduction and encourage them to review the number of allowances they claimed in 2017 to determine if the number should be adjusted.

Penalties.

State law requires the Department to assess a $50 penalty against an employer that fails to file an information return by the date the return is due. The penalty was effective for taxable years beginning on or after January 1, 2016. The Secretary elected to automatically waive the failure to file penalty on NC-3s due to be filed by January 31, 2017, but which were filed after that date. The Department will impose the failure to file penalty on NC-3s due to be filed on January 31, 2018, if the return is not timely filed.

Payment settlement entity.

A “payment settlement entity” is required to submit a duplicate of all information filed with the IRS pursuant to Code Sec. 6050W (i.e. the Form 1099-K, “Merchant Card and Third Party Network Payments” information return) with the Department. A payment settlement entity has the same meaning as in Code Sec. 6050W. The statute also requires the entity to submit the Form 1099K information to the Secretary in an electronic format. The information must be filed with the Department on or before March 31 for the preceding calendar year. Any report not timely filed with the Secretary is subject to a penalty of $1,000. Of note, there is no provision in North Carolina law that permits the Secretary to waive the electronic filing requirement. (North Carolina Department of Revenue, NC-30, 2018 Income Tax Withholding Tables and Instructions for Employers, (12-17).)

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