New tax laws may change the amount of NC personal income taxes withheld from paychecks

Businesses in North Carolina have been instructed by the state Department of Revenue to have their employees complete a new NC-4 tax form and workers and employers may be unclear as to why this is required. The simple answer is that the tax plan signed into law by Gov. McCrory means taxpayers will be paying more or less in NC personal income taxes starting next year.

Employers in the state are required by law to withhold a portion of their employees’ wages, typically each pay period, for NC personal income taxes and the NC-4 form helps employers estimate the amount of taxes to withhold. The new NC-4 form attempts to ensure that no employee is stuck at the end of the year owing a lot in NC personal income taxes or is owed a large refund by the state as a result of employers continuing to withhold NC personal income taxes based on 2013 tax laws.

Whereas employers traditionally based these estimates primarily on the personal exemption, the loss of personal exemptions and various other changes in the tax plan – change in standard deduction allowance and the elimination of various tax credits, for example – may change the number of allowances an employee can take on their NC-4 form. As more allowances are taken, fewer taxes are withheld from an employee’s wages for NC personal income taxes.

As BTC highlights in its analysis of the tax plan, taxpayers earning less than $84,000 a year, on average, will see their taxes increase under the full tax plan. As will be clear beginning January 1st of next year, some employees will likely see an increase in the amount of taxes withheld from their wages for NC personal income taxes – for example, those who will no longer benefit from the personal exemption allowance or the state earned income tax credit (EITC). More than 906,000 low-wage North Carolina workers claimed the state EITC for the 2011 tax year – the tax plan allows this tax credit to expire at the end of 2013.  Others will see a reduction in the amount of taxes withheld from their wages for NC personal income taxes – for example, high-wage earners and individuals who take sizable itemized deductions – while some workers may see no change.

The tax plan produces winners and losers, and North Carolina workers will begin to see this reality reflected in their paycheck starting next year.

8 Comments

  1. Alex

    November 27, 2013 at 7:14 am

    I’m trying to figure out how folks will pay more taxes if the overall tax rate was cut by at least 2% and the standard exemption for each taxpayer was increased.

  2. Mark

    November 27, 2013 at 7:48 am

    The deductions and withholding were a little confusing. If I put zero withholding and “Single” I still get $288 tax free?

  3. Cedric

    November 27, 2013 at 2:27 pm

    It’s not just the cut in the state’s personal income tax rate that determines the amount of taxes withheld for state income taxes. For example, some tax payers would have benefited more from the personal exemption (which is eliminated under the tax plan) than the increased standard deduction in tax plan. This would change the amount of wages (income) subject to the lower income tax rate. As the blog post notes, the elimination of other existing tax credits could also change the amount of wages subject to the lower income tax rate — which may result in more withholding taxes taken from an employee’s wages for state income taxes.

  4. Billie Sentell

    November 28, 2013 at 11:03 am

    Is there any place or anything in our lives that the government does not want to, or does control? N.C. is by far the most taxable state I have ever lived in. Upon the purchase of a home in this state I was appalled at having to pay a run-off tax for the water that flows of my home. A road tax on my auto for the use of roads that are with out a doubt some of the worst. In the county I live in they are withholding monies to fix. N.C. claims to be broke, well why don’t some of these wealthy persons that are 6 figure income persons “DO THEIR SHARE” Our governor wanted to spend thousands of dollars to re fix the bathroom in his MANSION while some people have no bathroom to use. I this the American Way? But what can the little person do but give our opinion while we still have the right to do it!!!!!!!!!

  5. LayintheSmakDown

    November 29, 2013 at 4:24 pm

    The good thing is we are all going to see a tax decrease no matter what. The people will basically ignore these liberal lies when they see the positive effects on their paychecks.

  6. breanna

    December 1, 2013 at 9:19 pm

    I don’t understand how to fill out the new form.

  7. Heather

    December 4, 2013 at 10:54 am

    Basically, the middle class gets screwed again. Now the government takes all my tax dollars (no exemptions) and then it gets to decide how much of it, if any I might get back. Smoke and mirrors as usual.

  8. hunt

    December 7, 2013 at 2:57 am

    Why is it they can tell you how to fill out your tax when you have people that are a load to work 1099 so why don’t we all work 1099 . As a teacher in nc pay has been frozen for more then 5 years. When most teachers where hired they where given contracts that promised steps in pay ever year. Now you may be a ten year teacher getting layed as a three year teacher and now y have to pay more out of your check. Where is the help.