Most of North Carolina's tax revenues are from personal incomes taxes.
Image source: NCJustice.org
There’s news you must know whether you live in Raleigh, Durham, Greensboro or anywhere in North Carolina about income taxes. Major changes in NC tax law are here that promise to net you more take-home pay. But in order to get the best possible results from the income tax changes, you need to complete the new withholding forms accurately so you won’t have any unfortunate surprises when you file your 2014 income tax returns.
Tax Simplification and Reduction Act
The new act kicks in on January 1 next year and will offer a lower flat tax rate and a higher standard deduction. Personal exemptions are no longer allowed and many deductions and tax credits have ceased. If your employer hasn’t already asked you to complete a new withholding form, they likely will soon and you need to make sure you get it right the first time. If your employer doesn’t offer you the new NC-4 by year’s end, you can download one here, complete it and submit it to the payroll office at your work.
Allowances and Exemptions on the New NC-4 Form
Many employees will be required to claim zero allowances because of the new law. Unless you have a total of more than $10,000 in mortgage interest, real estate property taxes and charitable contributions, you are likely eligible for zero allowances. Unless you have health savings, moving expenses, alimony, student loan interest or IRA deductions, you are likely eligible for zero allowances. Those with federal child tax credits may be eligible for additional allowances. If possible, the NC-4 EZ form is preferable because of its simplicity - and you can use it unless you itemize deductions.
Simple tables on the new Form NC-4 EZ.
Image source: DORNC.com
Tips for Completing the New NC Tax Withholding Forms
#1 Choose NC-4 or NC-4 EZ – If you can use it, the NC-4 EZ is less of a hassle. There are three charts (see above) that allow you to easily determine your allowances based on the number of children you have. NC-4 EZ is for those taking zero tax credits or only child tax credits.
#2 Don’t panic when you see fewer allowances – The instructions will very likely indicate that you are eligible for fewer allowances on the new form, but don’t worry. This doesn’t mean that you’ll have more withheld from your taxes – in fact you should have less.
#3 Think carefully about your NC-4 – If you do itemize deductions, you‘ll need to use NC-4 but just use your 2013 information including your mortgage interest, IRA and student loan deductions to complete it unless you expect significant changes ahead in 2014.
#4 Split your allowances if you’re married – An allowance is worth $2,500 - so if you anticipate having $7,500 of deductions, divide it by $2,500. This indicates you should have a total of three allowances. Allocate these between you and your spouse (i.e. one of you take two and the other one on the NC-4).
Get Help If You’re Unsure
If you find the new NC-4 too complicated or aren’t sure if you’re completing it correctly, you can call the North Carolina Department of Revenue at 1-877-252-4487 for an assist completing your form. If you prefer to get help online, click here for the agency’s online taxpayer self-help center! It’s better to call for help than to submit an incorrect form and under (or over) withhold!
For advice on North Carolina bankruptcy, contact the law offices of John T Orcutt. We have locations in Raleigh, Garner, Fayetteville, Durham, Wilson and Greensboro to serve you. Call us now for a free consultation!