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 http://www.dor.state.nc.us/press/2013/nc4requirement.html and Q-A 18 at http://www.dor.state.nc.us/downloads/nc4_faq.pdf and the new withholding publication http://www.dor.state.nc.us/downloads/nc30.pdf.