Form Nc-30 - Income Tax Withholding Tables And Instructions For Employers - North Carolina - 2017 Page 5
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46Pension payment – A periodic payment or a nonperiodic
Except for eligible rollovers, a recipient of a pension
distribution, as those terms are
payment who has federal income tax withheld can elect
defined in section 3405 of the Code.
not to have State income tax withheld. Conversely, a
recipient who has State income tax withheld can elect
Withholding Required.
A pension payer
not to have federal income tax withheld.
required to withhold federal tax under section 3405 of
An election not to have tax withheld from a pension
the Code on a pension payment to a North Carolina
payment remains in effect until revoked by the recipient.
resident must also withhold State income tax from the
An election not to have tax withheld is void if the recipient
pension payment. If a payee has provided a North
does not furnish the recipient’s tax identification number
Carolina address to a pension payer, the payee is
to the payer or furnishes an incorrect identification
presumed to be a North Carolina resident and the
number.
In such cases, the payer will withhold on
payer is required to withhold State tax unless the
periodic payments as if the recipient is single claiming
payee elects no withholding. A pension payer that
zero allowances and on nonperiodic distributions at the
either fails to withhold or to remit tax that is withheld
rate of 4 percent.
is liable for the tax.
A nonresident with a North Carolina address should
A pension payer must treat a pension payment paid
also use Form NC-4P to elect not to have State income
to an individual as if it were an employer’s payment of
tax withheld. Completing Form NC-4P and electing not
wages to an employee. If the pension payer has more
to have State tax withheld does not necessarily mean
than one arrangement under which distributions may
that the recipient is a resident of North Carolina.
be made to an individual, each arrangement must be
treated separately.
Exceptions to Withholding. Tax is not required
to be withheld from the following pension payments:
Amount to Withhold. In the case of a periodic
payment, as defined in Code section 3405(e)(2),
(1) A pension payment that is wages.
the payer must withhold as if the recipient were
(2) Any portion of a pension payment that meets both
a single person with zero allowances unless the
of the following conditions:
recipient provides an allowance certificate (Form
a. It is not a distribution or payment from an
NC-4P) reflecting a different filing status or number of
individual retirement plan as defined in section
allowances. Form NC-4P, Withholding Certificate for
7701 of the Code.
Pension or Annuity Payments, is used by a recipient of
b. The pension payer reasonably believes it is not
pension payments who is a North Carolina resident to
taxable to the recipient.
report the correct filing status, number of allowances,
(3) A distribution described in section 404(k)(2) of the
and any additional amount the recipient wants withheld
Code, relating to dividends on corporate securities.
from the pension payment. It may also be used to elect
(4) A pension payment that consists only of securities
not to have State income tax withheld. In lieu of Form
of the recipient’s employer corporation plus cash
NC-4P, payers may use a substitute form if it contains
not in excess of $200 in lieu of securities of the
all the provisions included on Form NC-4P.
employer corporation.
(5) Distributions of retirement benefits received
For a nonperiodic distribution, as defined in Code
from North Carolina State and local government
section 3405(e)(3), four percent (4%) of the distribution
retirement systems and federal retirement systems
must be withheld. A nonperiodic distribution includes an
identified as qualifying retirement systems under
eligible rollover distribution as defined in Code section
the terms of the Bailey/Emory/Patton settlement
3405(c)(3). State law differs from federal law with
that are paid to retirees who were vested in the
respect to eligible rollover distributions. Federal law
retirement systems as of August 12, 1989.
imposes a higher rate of withholding on eligible rollover
distributions than on other nonperiodic distributions.
Notification Procedures for Pension Payers.
State law imposes the same rate of withholding on all
A pension payer is required to provide each recipient
nonperiodic distributions.
with notice of the right not to have State withholding
apply and of the right to revoke the election. The notice
Election Not to Have Income Tax Withheld. A
requirements for North Carolina purposes are the same
recipient may elect not to have income tax withheld from
as the federal notice requirements, which are provided
a pension payment unless the pension payment is an
in section 3405(e)(10) of the Code. Section D of Federal
eligible rollover distribution.
A recipient of a pension
Regulation 35.3405-1 contains sample notices that may
payment that is an eligible rollover distribution does
be modified for State purposes to satisfy the notice
not have the option of electing not to have State tax
and election requirements for periodic payments and
withheld from the distribution.
nonperiodic distributions.
Page 5
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