The North Carolina Department of Revenue released the 2017 state income tax withholding tables and guide to its website. Employers should note that the supplemental withholding rate for 2017 will decrease from 5.85% to 5.599%.

Effective January 1, 2017, a 2015 legislative change (Session Law 2015-241) lowers the state income tax rate to 5.499%, down from 5.75%. The new law also requires North Carolina income tax to be withheld from wages at a rate that is 0.1% higher than the individual income tax rate; therefore, the withholding rate on wages paid on or after January 1, 2017, will be 5.599%.

For more information about the law changes, see the Department's notice or call the Department at +1 877 252 3052.

Supplemental income tax withholding

If you pay supplemental wages separately (or combine them with regular wages in a single payment and specify the amount of each), the income tax withholding method depends in part on whether you withhold income tax from your employee's regular wages. If you withhold income tax from an employee's regular wages, you can use one of these methods for the supplemental wages:

— Withhold a flat 5.599% (down from 5.85% for 2016), or
— Add the supplemental and regular wages for the most recent payroll period this year. Then figure the income tax as if the total were a single payment. Subtract the tax already withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If you did not withhold income tax from the employee's regular wages, use method (b).

Other legislative changes effective for tax year 2016 continue for 2017

— An increase to the standard deduction required adjustments to the Multiple Jobs Table and the allowance worksheets for Forms NC-4, NC-4 NRA, and NC-4P. The changes are minor and employees are not required to submit a new Form NC-4, Employee's Withholding Allowance Certificate, unless the number of withholding allowances to which they are entitled decrease or the employee has claimed exemption from withholding. Pension and annuity recipients who have previously elected not to have state income tax withheld from their payments do not have to submit a new NC-4P unless they are revoking their previous election.
— Beginning with the 2016 Form NC-3, Annual Withholding Reconciliation, which for tax year 2016 is due to the Department by January 31, 2017, a failure to file penalty will be assessed on any Form NC-3 filed after January 31, 2017.

2016 Form W-2/1099 electronic filing requirement

Employers are required to file 2016 Forms W-2 and 1099 along with North Carolina Form NC-3, Annual Withholding Reconciliation, electronically or on CD by January 31, 2017. The 2016 Form W-2 CD specifications are available here and the 2016 Form 1099 specifications are available here.

The Department has established a web page that provides information about the electronic filing options for Form NC-3 and Forms W-2.1099.

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