IMPORTANT NC TAX LAW UPDATE! – 2014 North Carolina Amended Returns

Breaking News 123rfPerhaps the cruelest April Fool’s Day joke of them all (except that it is not actually a joke) are the North Carolina tax law changes that were signed into law this week!

On April 1, 2015 the North Carolina Department of Revenue released updated guidance that impacts the 2014 tax returns.  Yes – those are the returns that most people have already filed or about to file shortly!

Who is Impacted by the North Carolina Tax Law Changes?

Quite a few people will be impacted by the changes in the law.  However, those most likely to be affected incurred the following expenses during for 2014:

Mortgage Premiums

Many people are eligible to deduct the amount they pay for mortgage premium insurance in addition to mortgage interest on their federal returns.  However, the state will not accept such a deduction; therefore, amounts paid for mortgage insurance premiums are subject to North Carolina income tax.

Education Expenses

Amounts spent on qualified educational expenses are allowed as either a deduction or credit on the federal tax return.  The state will not allow any educational deductions or credits on the return.  As such, educational expenses deducted from the federal return will  be subject to North Carolina income tax.

Cancellation of Debt Related to Home

In many cases, individuals who had lost their primary homes had their mortgage debt canceled.  This cancellation of debt was excluded from federal taxable income for those who qualified.  However, the state considers this cancellation of debt taxable income on which North Carolina income tax must be paid.

For a full list of changes, please review the North Carolina Notice dated April 1, 2015 found at this link: http://www.dor.state.nc.us/taxes/impactofcodeupdate040115.pdf

What To Do If You Already Filed Your 2014 North Carolina Tax Return

Unfortunately, amended tax returns will need to be prepared and filed if the originally filed return included any of the deductions which are now disallowed.   Amended return are filed on Form D-400X; see links below.

North Carolina Amended Return Form (D-400X) – http://www.dornc.com/downloads/D400X.pdf

North Carolina Amended Return Form Instructions  –http://www.dor.state.nc.us/downloads/d400x_instructions.pdf

When Are North Carolina Amended Returns Due?

Time is most definitely of the essence as the amended tax returns are due April 15th!  Amended returns filed after that deadline may be subject to interest and late-payment penalties.

 

Source:  North Carolina Department of Revenue Notice Dated April 1, 2015 – http://www.dor.state.nc.us/taxes/impactofcodeupdate040115.pdf

 

Related Articles:

What’s New for 2014 Federal Tax Returns (Due in April 2014)

What’s New for 2014 North Carolina Tax Returns (Due in April 2015)

Simply Taxes, LLC is a local year-round tax preparation firm with an office located in North Raleigh. Our Raleigh accountants are ready to work one-on-one with you to help optimize your tax deductions and to resolve any other tax issues in a professional manner.

The information contained within this article is for general guidance only. As such, it should not be used as a substitute for consulting with professional accounting, tax, legal or other competent advisers.  

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