Withholding Taxes: North Carolina

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

• Residents of North Carolina are subject to North Carolina income tax withholding on all wages earned both inside and outside of the state. Nonresident employees are subject to North Carolina withholding on any part of wages paid for services performed in North Carolina. See Withholding on Residents, Nonresidents and Expatriates.
• On or before the first day of work, employees must complete and submit to their employer Form NC-4, Employee's Withholding Allowance Certificate, in addition to federal Form W-4. Employers must send copies of Forms NC-4 to the state Department of Revenue in certain circumstances. Form NC-4 NRA, Nonresident Alien Employee's Withholding Allowance Certificate, must be completed and submitted by nonresident alien employees. See Employee Withholding Forms.
• The method of withholding on supplemental wages differs depending on whether the supplemental wage payment is paid at the same time as regular wages in a single payment with the amount of each payment specified, or paid separately from regular wages. See Supplemental Wages.
• Vacation pay is subject to withholding as if it were a regular wage payment or as supplemental wages. See Vacation Pay.
• An employer should withhold income tax on tips from wages or funds the employee makes available. If an employee receives regular wages and reports tips, an employer should figure income tax as if the tips were supplemental wages. See Tips.
• A payer that expects, in due course of a trade or business, to pay more than $1,500 of non-wage compensation to a payee must deduct and withhold North Carolina income tax from that non-wage compensation. Additional requirements apply to such payers. Exceptions apply to certain payees. See Non-Wage Compensation.
• In North Carolina, all severance pay is subject to income tax withholding. See Severance Pay.
• An employer must give each employee who was paid wages a Form W-2, Wage and Tax Statement, by the annual due date. Additional requirements apply. See Form W-2 Requirements.
• North Carolina has an earned income tax credit (EITC) program. See Earned Income Tax Credit Notices.
• North Carolina employers must keep certain withholding tax records for at least three years. See Recordkeeping Requirements.