Tax and Money Tip of the Week:
New NC Tax Law and NC Form NC-4
December 11, 2013 | No. 165
Form NC-4 (Withholding Allowances)
Lately, we have been fielding a lot of questions from clients concerning the completion of Form NC-4 for 2014.
The NC-4 is used by an employee to tell the payroll department how many allowances should be used to determine the amount of NC income tax that is to be withheld from an employee’s paycheck. Note that this form is for state withholding only – it does not impact the amount of your federal withholding.
With the new tax law dropping the 2014 individual tax rate to a flat 5.8% rate and many deductions being eliminated, employers have been are asking employees to complete new NC-4 forms for 2014.
In the past, the number of allowances was based on the number of dependents on your tax return.
For 2014, the number of allowances claimed is based on the amount of your NC itemized deductions, not the number of dependents. (Additionally, there is a new form (NC-4 EZ) that can be filed instead of the NC-4.)
If your employer has asked you to complete a new NC-4 for 2014, most employees can utilize the schedules on the face of Form NC-4 EZ to determine the number of allowances to claim.
If you have itemized deductions in the past and expect to do so in the future, you can use the schedules in the NC-4 instructions to calculate the number of allowances to claim and we are telling our clients to use the same number of allowances as they have used in the past to be conservative.
Remember, this form is only used to determine the amount of the NC withholding on your regular paychecks. If you claim to few allowances, you will get an NC refund when you file your 2014 return. But if you claim too many allowances, you will owe additional tax when you file your 2014 return!
Questions or Comments?
Mark Vitek, CPA/PFS, CFP®
…until next week.