ElectroFile Income Tax Service   Income Tax Service   Terry Hough, President
Terry Hough

Filing the necessary and new NC-4 with your employer.

December 10, 2013

Your employer has probably notified you that you MUST file a new NC-4 (or NC-4EZ) before the end of the year.

We've been getting numerous calls from our clients, some almost in panic, asking about filing the NC-4. Several employers in the area, from Guilford County, Timco, Volvo, etc. have sent emails or documents to their employees asking them to file the new NC-4 immediately. That has prompted a lot of folks to ask for assistance.

First, lets discuss why this is happening.

The North Carolina General Assembly passed House Bill 908 that becomes effective for tax year after 2013. Under this new law, there are numerous changes to how your NC Income Tax will be computed for tax year 2014 and beyond. So, that creates the necessity to compute your NC income tax withholding in a different manner and forces your employer to obtain a new NC-4 (or NC-4EZ) from you before the first payroll is computed in 2014. The new law also affects how withholding is done on pension and annuity payments, so you may also need to file a new NC-4P with such payers.

Now, the problem is that the new NC-4 (and NC-4EZ) forms are a bit more complex to complete than in the past. You will need 15-30 minutes to read and work your way through the various computations to determine what to put on Line 1 and 2 of the NC-4 (or NC-4EZ). But, don't panic... it just takes a little patience and reading the instructions. It will help to have your 2012 tax return in front of you while completing the new NC withholding form.

If you do not itemize your deductions on your tax return, then your should file a NC-4EZ. How do you know if you itemize? Easy, look at your 2012 tax return copy... Did you file a Form 1040-EZ or a Form 1040A? If so, you did not itemize. If you filed a Form 1040, look deeper and see if there is a Schedule A included in the return. If so, you will need to file a NC-4.

I don't itemize, so I need to file NC-4EZ. How do I complete it?

  1. Complete the heading with your Social Security Number, Name, Address, etc.
  2. Look at your 2012 tax return and determine which filing status you used, and then X the appropriate Marital Status area in the heading area.
  3. Go to Line 1 and read the instruction. Find your Marital Status in the tables above Line 1, go over to the # of Children under age 17 that matches the number of children under age 17 that you have, and pick up the # of Allowances for your income range. Enter that # of Allowances on Line 1.
  4. If you want to have some additional withholding each pay period, enter that amount on Line 2.
  5. Read the questions for Line 3. Look at your 2012 NC Income Tax Return, LIne 18 to see if you had any tax liability. If Line 18 is zero, then check the box on Line 3.
  6. Line 4 doesn't apply to many taxpayers. If you think it applies to you, please consult with us to make sure before you check the box on Line 4. Normally this should be left blank.
  7. Line 5 will not apply to many taxpayers. If you no longer qualify to check Line 4 and you have claimed this exemption before, then you should check the box on Line 5. Again, it would be best to check with us first. Normally Line 5 will be left blank.
  8. Sign the form and date it.
  9. Turn it in to your employer as soon as you possible can so that they can insure the correct withholding on your first paycheck of 2014.
    Hint: Make a copy for yourself and bring it to your tax appointment in early 2014. That way we can assist if some changes should be made.

I itemize my deductions every year, so I need to file the NC-4. How do I complete it?

  1. Fill in the boxes just below Line 2. Enter your Social Security Number, Name, Address, etc.
  2. Look at your 2012 tax return and determine which filing status you used, and then fill in the appropriate circle in the Marital Status box.
  3. Now, lets complete Line 1. Read the instruction. It will send you to the NC-4 Allowance Worksheet to determine the number to enter here. Find the secton for your Marital Status and answer all the questions for that section and follow its directions. It may send you back with a number to enter on Line 1 or send you to complete Part II of the Allowance Worksheet. You may need to complete Schedule 1, 2, 3 and.or 4. So, lets use your 2012 numbers as an estimate for 2013.
    Completing Schedule 1
    • Schedule 1 Qualifying mortgage interest - Again you should refer to your 2012 tax return. Look for your mortgage interest deduction on Schedule A of your Federal return (the total of Line 10, 11 and 12). Adjust as required to your anticipated 2014 interest payments.
    • Schedule 1 Real estate property taxes - Refer to your Schedule A again. It is the number on Line 6. Use your 2013 Property Tax bill amount if you already know it.
    • Schedule 1 Charitable contributions - Refer to your Schedule A again. It is the total of Line 16 and 17. Adjust this amount if you have made more or less contributions during 2013 or plan a different amount for 2014.
    • Schedule 1 Total Esitmate NC itemized deductions - Do the math as instructed and take the total to Part II, Line 1

    Completing Schedule 2
    Again, we will use your 2012 amounts as a guide. Adjust these amounts if things have changed for 2013 or you expect them to for 2014.
    • Schedule 2 Health savings account deduction - Look at your Federal Form 1040, Line 25. Adjust to expected 2014 payments
    • Schedule 2 Moving expenses - Unless you expect a job related move in 2014 leave this line blank.
    • Schedule 2 Alimony paid - Look at your Federal Form 1040, Line 31a. Adjust to expected 2014 payments.
    • Schedule 2 IRA deduction - Look at your Federal Form 1040, Line 32. Adjust to expected 2014 contributions.
    • Schedule 2 Student loan loan interest deduction - Look at your Federal Form 1040, Line 33. Adjust to expected 2014 payments.
    • Schedule 2 Certain business expenses for reservists, performing artist, and fee-basis government officials - Look at your Federal Form 1040, Line 24. Adjust to expected 2014 expenses.
    • Schedule 2 other amounts - Unless we have advised you otherwise, leave these fields blank.
    • Schedule 2 Gross Income - Do the math on Schedule 2 as instructed and take the total to Part II, Line 4.

    Completing Schedule 3
    • Most of our tax clients will not have any entries in Schedule 3. Leave all of this blank and enter -0- on Part II, Line 7.

    Completing Schedule 4
    1. Schedule 4 Tax Credit for Income Taxes Paid to Other States by Individuals - You may refer to your 2012 NC D-400TC Line 6. Of course this number is only a guide since your income taxed in another state is not likely to be the same during 2014. But, it may help you estimate your entry.
    2. Schedule 4 Credit for Children - Complete this section as instructed.
    3. Schedule 4 All of the GS Lines and Total Credit Carryovers - Leave these all blank.
    4. Schedule 4 Total Tax Credits and Carryovers - Do the math on Schedule 4 as instructed and take the total to Part II, Line 11.

  4. Complete Part II down through 14.
  5. If you use filing status Married Filing Jointly and your spouse works, then spit the allowances shown on Line 14 between you and your spouse as you desire. Enter the allowances allocated to your spouse on Line 15.

    Note: Your spouse should enter the number from Line 15 on Line 1 of their NC-4.

  6. Complete the math for Line 16 of Part II and enter the results on NC-4 Line 1.
  7. Sign the form and date it.
  8. Turn it in to your employer as soon as you possible can so that they can insure the correct withholding on your first paycheck of 2014.
    Hint: Make a copy for yourself and bring it to your tax appointment in early 2014. That way we can assist if some changes should be made.

What happens if I don't file a NC-4 (or NC-4EZ) with my employer?

Don't forget... complete and file a NC-4 (or NC-4EZ) with your employer by the end of December 2013.

I hope this long message has helped you. We look forwared to seeing you soon.

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All information provided is general in nature and intended to create awareness, not to address the specific circumstances or concerns of any individual or entity. Although we try to provide correct and timely information, we cannot guarantee the accuracy of any information or that such information will continue to be accurate in the future due to the changing nature of the tax laws. Before acting on any of the information provided here, you should consult with a professional advisor who knows all of the unique facts and circumstances pertinent to your particular situation.

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