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. This includes employer reimbursements for ordinary and necessary business expenses.
Withholding is also required if more than $1,500 in nonwage compensation is paid to:
A contractor that uses an Individual Taxpayer Identification Number (ITIN);
A nonresident contractor for services performed in North Carolina; or
A contractor that fails to provide the payer a taxpayer identification number, provides an invalid taxpayer identification number, has applied for an ITIN, or has an expired ITIN (NC Gen. Stat. Sec. 105-163.1).
Nonwage compensation must be reported on Form NC-1099M unless the payer was required to file federal Form 1099-NEC or 1099-MISC.
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 ...

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