North Carolina Withholding laws & HR compliance analysis

North Carolina Withholding: What you need to know

North Carolina law requires employers to withhold state income taxes from the wages of resident employees for work performed within or outside of the state and from nonresidents for work done within the state. A resident employee's wages are not subject to withholding if the wages have been subject to another state's income tax withholding.
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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.
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
New employers must register for a North Carolina Withholding Tax Identification Number by submitting a completed business registration application, Form NC-BR, Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Machinery, Equipment, and Manufacturing Fuel Tax, to the Department of Revenue. Employers may use the department’s online business ...

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