Many employees in North Carolina have recently been asked by their employers to fill out a new NC-4 EZ or NC-4, North Carolina Employee’s Withholding Allowance Certificate. As such, a good amount of confusion and some panic has set in regarding this request. Why is a new form required? What is a NC-4 EZ or NC-4 anyway? Which is the correct form to use? These are just some of the questions many people have been left pondering. A quick run-down of the pertinent information is provided below in an attempt to alleviate some anxiety.
Why Do I Need To Fill Out A New North Carolina Withholding Form?
January 1, 2014 will not only usher in a new year but a host of new North Carolina tax law changes that will take effect. Of all of the new 2014 North Carolina tax law changes, perhaps the most drastic change is the elimination of three personal income tax brackets (ranging from 6% to 7.75%) to a flat rate of 5.8%. Along with the introduction of the flat rate is the elimination of personal deductions for taxpayers, their spouse, children, and any other dependents and the associated allowances that were previously allowed to be claimed on their old NC-4, North Carolina Employee’s Withholding Allowance Certificate.
What Is A North Carolina Withholding Allowance? How Many NC Allowances Should Be Claimed?
For starters, a withholding allowance in conjunction with filing status (i.e., single, married filing jointly, etc.) determines how much tax is withheld from each paycheck. In general, the higher the allowances claimed, the less tax is taken out of each check. All North Carolina income tax withheld by an employer throughout the year is deducted from the tax calculated on income as listed on a personal North Carolina income tax return. A tax refund will result if the amounts withheld throughout the year exceed the amount of North Carolina tax calculated. Conversely, a tax balance will be due if not enough tax is withheld throughout the year. Forms NC-4 EZ and NC-4 were created to assist taxpayers with claiming the proper number of withholding allowances.
What Is A NC-4 EZ or NC-4? Which New North Carolina Withholding Form to Fill Out?
The North Carolina Department of Revenue has released two different forms, NC-4 EZ and NC-4, to help taxpayers determine the proper number of allowances to claim. So what are the key differences?
The NC-4 EZ is the simpler of the two forms to fill out. This form is ideal for employees who plan to claim the North Carolina standard deduction instead of itemizing and for those who don’t plan on claiming any tax credits besides the credit allowed for child dependents under the age of 17. This form can also be used for anyone who does not wish to bother with filling out the more cumbersome NC-4 version of the withholding form.
The NC-4 is by far the more complicated version of the form; however, it has the potential to allow taxpayers to keep more in their pockets throughout the year instead of waiting to receive an overpayment in the form of a refund when their taxes are filed in the following year. Note that the NC-4 does require a bit more patience as reference will need to be made to a prior return and an estimation of 2014 income, deductions, and credits will need to be considered.
Too confused by the forms? When in doubt, play it safe and claim zero allowances on Form NC-4 EZ. Claiming too many allowances could result in a hefty tax bill and potential penalties for untimely withholding of taxes.
Still Need Help With NC-4 EZ or NC-4 North Carolina Employee’s Withholding Certificate?
The North Carolina Department of Revenue has put together a Frequently Asked Questions (FAQs) page regarding the new withholding requirements. Here is the link to the aforementioned information – http://www.dornc.com/downloads/nc4_faq.pdf
It is advised to seek the guidance of a tax professional for more specific questions and tax planning opportunities related to claiming North Carolina withholding allowances.
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.