Income Tax Withholding Tables And Instructions For Employers Page 8
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699. Payee’s Identification Number
contractor and not an employee for services performed
in this North Carolina.
An individual employee or nonresident contractor
Withholding requirement. If, in the course of your
is identified by the individual’s social security number.
trade or business, you pay compensation of more than
A contractor that is not an individual (corporation,
$1,500 during the calendar year to an ITIN contractor, you
partnership, limited liability company) is identified by its
must withhold North Carolina income tax at the rate of 4
federal identification number. Show the payee’s social
percent of the compensation paid to the contractor.
security number, federal identification number and the
name and address on Forms W-2 and NC-1099PS and
How and when to pay the tax withheld. If you pay
use it in any correspondence pertaining to a particular
compensation to an ITIN contractor and you do not already
employee or contractor. ITIN contractors are identified by
have a withholding account identification number, you
their ITIN numbers. An ITIN number is issued by the IRS to
must complete Form NC/BR. You must report and pay
a person who is required to have a taxpayer identification
the tax withheld on a quarterly, monthly, or semiweekly
number but does not have and is not eligible to obtain a
basis depending on the average amount withheld during
social security number. Show the payee’s ITIN number
the month. (See numbers 15, 16, and 17 for determining
on Form NC-1099-ITIN.
the basis on which to file.) If you withhold from ITIN
contractor compensation and wages, you must report the
10. Withholding from Wages
withholding from ITIN contractor compensation with the
wage withholding.
The term wages generally has the same meaning
as in Section 3401 of the Internal Revenue Code except
Form NC-1099-ITIN and annual reconciliation
that it does not include the amount an employer pays an
requirement. If you withhold tax from an ITIN contractor,
employee for reimbursement of ordinary and necessary
you must give the contractor Form NC-1099-ITIN,
business expenses of the employee. North Carolina has
Compensation Paid to an ITIN Contractor, showing the
no provision requiring backup withholding.
amount of compensation paid and the amount of North
Carolina income tax withheld during the calendar year.
Farm labor. Farmers are required to withhold State
Federal Form 1099-MISC may be filed in lieu of Form
income tax from wages paid to agricultural workers if they
NC-1099-ITIN if it reflects the amount of North Carolina
are required to withhold tax for federal purposes.
income tax withheld. Form NC-1099-ITIN must be given to
See Federal Publication 15, Circular E, Employer’s
the contractor by January 31 following the calendar year
Tax Guide, for additional information regarding taxable
in which the compensation was paid. If the services are
wages.
completed before the end of the calendar year and the
contractor requests the form, it is due within 45 days after
11. Payments Exempt from
the last payment of compensation to the contractor.
Withholding
The Annual Withholding Reconciliation (Form NC-3)
that reconciles the amount withheld from each contractor
Employers are required to withhold on wages to the
must be filed with the Department on or before February
same extent required for federal income tax purposes.
28 following the year in which the compensation was paid.
A recipient of any payments exempt from withholding is
Payers who report only ITIN compensation withholding
required to pay estimated income tax if the recipient’s
must file the annual reconciliation report and include the
income meets the minimum requirements for filing.
withholding statements. Payers who are subject to both
If you and the individual wish to enter into a voluntary
wage withholding and withholding from ITIN compensation
agreement to withhold North Carolina tax, you may report
must file one annual reconciliation report that includes the
and pay the amount withheld to the Department, and
two types of withholding statements.
the individual will receive credit on his income tax return
Amounts withheld in error. If you withhold an amount in
provided you follow the rules which apply to withholding.
error and the amount is refunded to the contractor before the
Since the agreement is voluntary, credit cannot be claimed
end of the calendar year and before you give the NC-1099-
for any amount withheld unless it is properly paid to the
ITIN to the contractor, do not report the refunded amount on
Department of Revenue. The individual should complete a
the NC-1099-ITIN or the annual reconciliation statement.
withholding allowance certificate, Form NC-4, and request
If the amount withheld in error has already been paid to
that the agreed amount be withheld.
the Department, reduce your next withholding payment
Domestic employees. Employers are not required
accordingly. Amounts are considered withheld in error if
to withhold State income tax from the wages of domestic
they are withheld from a person who is not a contractor, if
employees; however, the employer and employee may
it is withheld from a payment that is not compensation, or
enter into a voluntary agreement to withhold from the
if it is in excess of the amount required to be withheld.
Page 8
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