Tax & Accounting Blog

North Carolina Requires New NC-4P Withholding Documentation for Pension and IRA Distributions

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US CAPITOL BUILDING LOOKING AT WEST STEPS FROM HELICOPTER.Due to changes in North Carolina income tax law, recipients of pension or annuity payments must complete and provide to their payer a new Withholding Certificate for Pension or Annuity Payments, Form NC-4P, in order to withhold the correct amount of North Carolina income tax for pension payment periods beginning on or after January 1, 2014. Pension recipients who fail to furnish a new Form NC-4P for withholding are to be withheld as if “married” with three allowances. If the recipient of periodic pension payments had previously made a valid election on file with the payer in 2013 not to have state taxes withheld, that election remains in effect until revoked by the recipient. However, if a payee submits an NC-4P that does not contain the taxpayer identification number, or if the taxpayer identification number is incorrect, the payer cannot honor a payee’s request not to have income tax withheld.

For nonperiodic distributions as defined in IRC sec. 3405(e)(3) including IRA distributions, eligible rollover distributions (ERDs) and other lump-sum distributions, North Carolina withholding remains at 4%. A “no withholding” election on an NC-4P valid in 2013 for nonperiodic distributions does not continue in effect on or after January 1, 2014. Pension payers who make nonperiodic distributions must withhold 4% of the distribution to recipients who have not furnished a new NC-4P.

See and Q-A 18 at and the new withholding publication