Income Tax Withholding Tables And Instructions For Employers Page 7
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69is not required to be withheld from a corporation or limited
Carolina income tax withheld during the calendar year.
liability company that has obtained a certificate of authority
Federal Form 1099-MISC may be filed in lieu of Form
from the Secretary of State or from a partnership that has
NC-1099PS if it reflects the amount of North Carolina
a permanent place of business in North Carolina.
income tax withheld. Form NC-1099PS must be given to
the contractor by January 31 following the calendar year in
No tax is required to be withheld from an entity that
which the compensation was paid. If the personal services
is exempt from North Carolina corporate income tax
are completed before the end of the calendar year and the
under G.S. 105-130.11. This includes any organization
contractor requests the form, it is due within 45 days after
that is exempt from federal income tax under the Internal
the last payment of compensation to the contractor.
Revenue Code. The entity must provide documentation
of its tax exemption to the payer, such as a copy of the
The Annual Withholding Reconciliation (Form NC-3)
organization’s federal determination letter of tax exemption
that reconciles the amount withheld from each contractor
or a copy of a letter of tax exemption from the Department
must be filed with the Department on or before February
of Revenue.
28 following the year in which the compensation was paid.
Payers who report only personal services withholding
Tax is not required to be withheld from personal
must file the annual reconciliation report and include the
services income paid to an individual who is an ordained or
withholding statements. Payers who are subject to both
licensed member of the clergy or who is a resident of North
wage withholding and withholding from personal services
Carolina. The payer must obtain from any individual from
income must file one annual reconciliation report that
whom the payer does not withhold because the individual
includes the two types of withholding statements.
is a resident of this State the individual’s address and social
security number and retain this information in its records.
Amounts withheld in error. If you withhold an
amount in error and the amount is refunded to the
Withholding is only required if the contractor is paid
contractor before the end of the calendar year and before
more than $1,500 during the calendar year. No tax is
you give the NC-1099PS to the contractor, do not report
required to be withheld if a payment is $1,500 or less
the refunded amount on the NC-1099PS or the annual
and, at the time the payment is made, the payer does
reconciliation statement. If the amount withheld in error
not believe that the total compensation to be paid to the
has already been paid to the Department, reduce your
personal services provider during the year will exceed
next withholding payment accordingly. Amounts are
$1,500. If additional compensation paid later in the
considered withheld in error if they are withheld from a
year causes total compensation for the year to exceed
person who is not a contractor, if it is withheld from a
$1,500, the payer is not required to withhold tax from the
payment that is not compensation, or if it is in excess of
additional compensation to make up for the compensation
the amount required to be withheld.
from which no tax was withheld. If the payer expects to
pay a contractor more than $1,500 during the year, the
8. Withholding on Contractors
payer should withhold from each payment even if the first
Identified by an Individual Taxpayer
payment does not exceed $1,500.
Identification Number (ITIN)
How and when to pay the tax withheld. If you pay
personal services income to a nonresident contractor
The following definitions are applicable with respect
and you do not already have a withholding account
to withholding on contractors identified by an ITIN:
identification number, you must complete Form NC/BR.
(a) Compensation. Consideration a payer pays to
If you withhold from both personal services income
an ITIN holder who is a contractor and not an employee
and wages, you must report the withholding from personal
for services performed in North Carolina.
services income with the wage withholding.
You must
report and pay the tax withheld from nonresident personal
(b) ITIN contractor. An ITIN holder who performs
services income on a quarterly, monthly, or semiweekly
services in North Carolina for compensation other than
basis depending on the average amount withheld during
wages.
the month. (See numbers 15, 16 and 17 for determining
(c) ITIN holder. A person whose taxpayer identification
the basis on which to file.) You may be subject to a
number is an Individual Taxpayer Identification Number
change in filing frequency by including the withholding
(ITIN). An ITIN is issued by the IRS to a person who is
from personal services income with wage withholding.
required to have a taxpayer identification number but does
Form NC-1099PS and annual reconciliation
not have and is not eligible to obtain a social security
requirement. If you withhold tax from a nonresident
number.
contractor, you must give the contractor Form NC-1099PS,
Personal Services Income Paid To A Nonresident, showing
(d) Payer. A person who, in the course of a trade or
the amount of compensation paid and the amount of North
business, pays compensation to an ITIN holder who is a
Page 7
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