Your Ultimate Guide to North Carolina Payroll

Employers in North Carolina are responsible for meeting various payroll regulations. These requirements differ from one state to another. To begin, this guide serves as an introduction to what North Carolina employers can expect to withhold and pay from their employees’ wages — such as unemployment insurance, personal income tax, and workers' compensation. 

Paying unemployment insurance in North Carolina

Employers in North Carolina are required to pay unemployment insurance (UI) taxes as part of their payroll taxes. This insurance provides temporary assistance to employees who have lost their jobs through no fault of their own.

State unemployment insurance tax rates in North Carolina

The unemployment insurance tax rates in North Carolina are determined by several factors including the employer's experience rating and the taxable wage base. Here’s a detailed look at the UI tax rates:

Employers can protest their tax rate in writing before May 1 of the calendar year for which the tax rate was assigned.

Withholding personal income tax from your North Carolina employees

Employers must withhold state personal income tax from their employees' wages based on the rates provided by the North Carolina Department of Revenue. This withholding supports the state’s public services such as education, transportation, and health care.

State withholding tax rates in North Carolina

The North Carolina state withholding tax rate has been set at 4.60%. This slight adjustment from previous years reflects ongoing changes in the state's fiscal policies.

• State withholding tax rate: The rate for 2024 is 4.60%, applicable to all taxable income
• State tax withholding state code: The code for North Carolina is 37
• Acceptable exemption form: Employees should use form NC-4 for declaring exemptions
• Basis for withholding state tax: The tax is calculated based on state exemptions that align with federal guidelines but are adjusted to fit North Carolina's specific requirements.

How withholding is calculated

The calculation of withholding taxes in North Carolina follows a structured formula:

• Initial wage assessment: Start with the gross wages for the payroll period
• Standard deduction application: Deduct the applicable portion of North Carolina’s standard deduction based on the payroll period and marital status
• Allowance consideration: Multiply the number of allowances claimed by the employee by the allowance value for the payroll period
• Net wage calculation: Subtract the total of the standard deduction and allowances from the gross wages to arrive at the net taxable wages
• Applying the tax rate: Multiply the net taxable wages by the tax rate of 4.60% to determine the amount of tax to withhold

Marital status and deductions

The standard deduction in North Carolina varies according to the taxpayer's filing status:

• Single, married, or surviving spouse: The annual standard deduction is $12,750
• Head of household: This status allows a higher deduction of $19,125 annually

These deductions significantly impact the calculation of taxable income, ensuring that the withholding reflects the taxpayer's actual tax liability as closely as possible.

Paying Your North Carolina workers’ compensation

Workers' compensation insurance is mandatory for most businesses in North Carolina. It covers medical expenses and wage replacement for employees who get injured at work. Employers must ensure they are compliant with the state's requirements to provide this coverage.

Workers compensation tax rates in North Carolina

The workers' compensation tax rate in North Carolina is set at 2.50% for insurers.

The workers' compensation tax rates, often referred to as insurance rates, are determined by various factors including the classification of the business, the company's claims history, and the overall amount of payroll. These rates are used to calculate the premiums that employers must pay to provide workers' compensation insurance for their employees. The North Carolina Rate Bureau (NCRB) plays a key role in recommending these rates.

In North Carolina, the cost of workers' compensation insurance is calculated per $100 of payroll. Each type of job or industry has a specific classification code, and each code has its own base rate, which is adjusted according to the individual employer's experience modification factor (a number derived from the comparison of an employer's historical claims data with industry averages).

For example, industries that are considered higher risk, such as construction, may have higher base rates, while lower-risk industries, such as office work, may have lower rates. The experience modification factor can either increase or decrease the base rate, depending on an individual company's claims history compared to its industry peers.

Payroll tax due dates in North Carolina

The payroll tax due dates were not specified in the provided documents. Generally, employers must adhere to a regular schedule for submitting payroll taxes, which can be monthly or quarterly, depending on the tax type and the amount due.

Submission process for payroll taxes in North Carolina

The process for submitting payroll taxes in North Carolina typically involves electronic filing. Employers should use the appropriate online platforms provided by the North Carolina Department of Revenue and other relevant state agencies to file and pay their payroll taxes.

Simplify US payroll tax compliance with Deel

At Deel, we are committed to providing valuable information on payroll taxes, compliance, and other state requirements for US and international businesses. While this guide is a valuable introduction to unemployment insurance, personal income tax, and workers’ compensation, there is much more to understand. 

Rather than figuring it out alone, many companies turn to Deel’s comprehensive solution for managing payroll. Our robust platform helps streamline the process and ensure full compliance. Ready to get started? Request a demo from Deel today!