Taxes must be withheld on “wages,” which include all cash and noncash payments for services performed by an employee. North Carolina has conformed its income tax statutes to the definitions of taxable income set out in the Internal Revenue Code. Compensation that is subject to federal withholding is also subject to state withholding.
Beginning June 12, 2018, employer reimbursements for ordinary and necessary business expenses are no longer excluded from the definition of wages subject to withholding.
Withholding is also required if more than $1,500 in nonwage compensation is paid to a contractor that uses an Individual Taxpayer Identification Number or to a nonresident contractor for personal services performed in North Carolina.
Exceptions. Payments for some services, including the following, are exempt from withholding:
• Agricultural labor, unless subject to federal tax withholding
• Domestic service in a private home or fraternity
• Services performed by military spouses or seamen exempted by federal law
• Services performed on an Indian reservation by a member of a federally recognized tribe