NC-4

[Lion EA]

Yes, I have a NC client, and I had skimmed notices about tax changes. Any of you NC preparers up to speed on this and willing to share? Client forwarded me the following from his employer:

Subject:

Employee’s Withholding Allowance Certificate Form NC-4 EZ and NC-4

Attachments:

(03a) NC-4.pdf (223 KB) (03b) nc4ez 2014.pdf (198 KB) Ultipro Directions for 2014 Tax Change.docx (103 KB)

The North Carolina General Assembly recently enacted House Bill 998 which becomes effective for taxable years beginning on or after January 1, 2014. Taxpayers may no longer claim a personal exemption for themselves, their spouse, children, or any other qualifying dependents. Additionally, many deductions and tax credits that impact North Carolina withholding tax are no longer available for tax years beginning on or after January 1, 2014.

As a result of this Act, all North Carolina employees must complete a new Employee’s Withholding Allowance Certificate, either Form NC-4 EZ or Form NC-4. The new form must be completed so the correct amount of State income tax is withheld for payment periods beginning on or after January 1, 2014.

As required by North Carolina, employees who fail to provide Revlon with the applicable updated form will have their tax withholding status set to “Single” with no allowances.

• Form NC-4 EZ: This form is suitable for most employees. Employees should use this form if: (1) they plan to claim the NC standard deduction and plan to claim no tax credits or only the credit for children, (2) they qualify to claim exempt status, or (3) they prefer not to complete the extended Form NC-4. Form NC-4 EZ can even be used by employees who plan to itemize deductions for personal tax filing.

• Form NC-4: This extended withholding form may provide more precise withholding figures, but will require historical tax return information and estimation of 2014 income, deductions, and credits.

Deadlines to complete:

Option 1 - Log on to UltiPro to complete Form NC-4 EZ by December 29th

Option 2 - Complete one of the attached forms and submit to the Human Resources Service Center by December 23rd.

[GeneInAlabama]

There has been a good bit of discussion on the Drake Forum about this and the general consensus seems to be that the whole thing is a big mess and the best way to handle it is to show proper filing status and list exemptions as zero. It seems the difference in withholding is not worth the effort required in filling out the form. I don't do any North Carolina returns, so my knowledge on this is not first hand.

[JohnH]

Yes, Gene's advice is correct. I'm telling all my NC clients that the only advice they should give their employees is to enter their marital status and -0- exemptions. NC has essentially eliminated personal exemptions and made several other adjustments, while lowering the tax rate. Presumably, it has negligible effect on most taxpayers (well, at least until they begin creeping the rate up in years to come).

I ran a few just for kicks in the past few days. Taxpayers in the $30K range will see a difference of about $2 - 3 in weekly withholding under the new scheme of they claim zero exemptions. So just how much trouble do we want to go to in order to increase or decrease the refund/balance due by $150? Not worth anyone's time to read the 10 pages of instructions that they're sending with the new forms.

And as noted in the OP, the employer instructions say to withhold at the zero exemption level if the form isn't returned, although I imagine most employers aren't going to be happy if the employee doesn't fill in the new form.