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New tax laws may change the amount of NC personal income taxes withheld from paychecks
Posted By Cedric Johnson On November 26, 2013 @ 3:03 pm In NC Budget and Tax Center | Comments Disabled
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.
Article printed from The Progressive Pulse: http://pulse.ncpolicywatch.org
URL to article: http://pulse.ncpolicywatch.org/2013/11/26/new-tax-laws-may-change-the-amount-of-nc-personal-income-taxes-withheld-from-paychecks/
URLs in this post:
 NC-4 tax form: http://www.dornc.com/press/2013/nc4requirement.html
 tax plan: http://www.ncleg.net/Sessions/2013/Bills/House/PDF/H998v7.pdf
 analysis of the tax plan: http://www.ncjustice.org/?q=budget-and-tax/btc-reports-final-tax-plan-falls-far-short-true-tax-reform
 Latest outlook on revenue and economy signals challenges with policy directions: http://pulse.ncpolicywatch.org/2014/01/23/latest-outlook-on-revenue-and-economy-signals-challenges-with-policy-directions/
 Taxpayers pay state income tax sooner under tax plan: http://pulse.ncpolicywatch.org/2013/12/10/taxpayers-pay-state-income-tax-sooner-under-tax-plan/
 Curtain call for North Carolina’s state Earned Income Tax Credit: http://pulse.ncpolicywatch.org/2014/01/31/curtain-call-for-north-carolinas-state-earned-income-tax-credit/
 No, not all taxpayers come out ahead under tax plan: http://pulse.ncpolicywatch.org/2013/12/10/no-not-all-taxpayers-come-out-ahead-under-tax-plan/
 N.C. lottery finds sales hook in new state income tax rate: http://pulse.ncpolicywatch.org/2014/01/03/n-c-lottery-finds-sales-hook-in-new-state-income-tax-rate/
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