TAXES 16-12, North Carolina State Income Tax Withholding
Published: March 17, 2016
Effective: Pay Period 01, 2014
Summary
This bulletin supersedes TAXES 14-02, North Carolina State Income Tax Withholding, dated January 9, 2014. The Tax Formula section has been modified regarding the National Finance Center (NFC) nontaxable and taxable biweekly fringe benefits deductions. All other information remains the same as shown below.
Note: As a result of the North Carolina General Assembly recently-enacted House Bill 998, Personnel Offices must ensure all employees file a new Form NC-4 EZ, Employee’s Withholding Allowance Certificate or Form NC-4, Employee’s Withholding Allowance Certificate.
Beginning with wages paid for Pay Period 01, 2014, the National Finance Center (NFC) will make the following changes to the State of North Carolina income tax withholdings:
- The standard deduction for Single, Married, and Qualifying Widow(er) filers has been increased from $3,000 to $7,500.
- The standard deduction for Head of Household filers has been increased from $4,400 to $12,000.
- The annual exemption, per allowance claimed, is now $2,500 for all filers. The $2,000 amount, per allowance, for employees with higher income has been removed.
- The tax tables for all filers have been removed and replaced by a flat 5.8 percent tax rate.
Tax Formula
State Abbreviation: |
NC |
State Tax Withholding State Code: |
37 |
Acceptable Exemption Form: |
NC-4 |
Basis for Withholding: |
State Exemptions |
Acceptable Exemption Data: |
S, M, H/Number of Allowances |
TSP Deferred: |
Yes |
Special Coding: |
None |
Additional Information: |
North Carolina has implemented a new withholding exemption claim form. The State of North Carolina has indicated that all employees must file a new Form NC-4 EZ or NC-4 for tax year 2014. |
Withholding Formula (Effective Pay Period 01, 2014)
- Subtract the nontaxable biweekly Thrift Savings Plan contribution from the gross biweekly wages.
- Subtract the nontaxable biweekly Federal Health Benefits Plan payment(s) (includes dental and vision insurance program and Flexible Spending Account - health care and dependent care deductions) from the amount computed in step 1.
- Add the taxable biweekly fringe benefits (i.e., taxable life insurance) to the amount computed in step 2 to obtain the adjusted gross biweekly wages.
- Multiply the gross biweekly wages by 26 to obtain the gross annual wages.
- Determine the standard deduction allowance by applying the following guideline and subtract this amount from the annual wages:
If the Employee Is:
The Standard Deduction Is:
Single
$7,500
Married and Qualifying Widow(er)
$7,500
Head of Household
$12,000
- Determine the allowances by applying the following guideline and subtract this amount from the annual wages:
Allowance = $2,500
- Multiply the annualized taxable wages calculated in the previous step by 5.8 percent to determine the annual tax amount.
- Divide the annual North Carolina income tax withholding by 26 and round to the nearest dollar to obtain the biweekly North Carolina income tax withholding.
- Add the additional amount or percentage elected by the employee to the pay period tax calculated in the above step and round to the nearest dollar to determine the amount of tax to be withheld for this pay period.
Resources
To view the updated tax formula, go to the HR and Payroll Clients page from the MyNFC drop-down menu on the NFC homepage. Click the Publications tab in the center ribbon. Select U.S. Income Tax Formulas from the Publication menu to launch the tax map. Click the desired State from the map provided for the formula.
Inquiries
For questions about NFC processing, authorized Servicing Personnel Office representatives should contact the NFC Contact Center at 1-855-NFC-4GOV (1-855-632-4468) or via the Internet using the Requester Console.