North Carolina Form D-400 - Individual Income Tax Return Instructions
New for 2012
- The starting point for the computation of North Carolina taxable income has changed from federal taxable income to federal adjusted gross income.
- An addition is required on the 2012 income tax return for taxpayers claiming bonus depreciation.
- A deduction is allowed for individuals who added back bonus depreciation and section 179 expense deduction on their 2011 income tax return.
- A $250 educator expense deduction will be allowed on the North Carolina return for 2012 if the federal deduction for educator expenses is not extended.
- Certain taxpayers are allowed a deduction of up to fifty thousand dollars ($50,000) of net business income included in federal adjusted gross income that is not considered passive under the Internal Revenue Code.
- The tax credit for small businesses that pay N.C. unemployment insurance has expired.
Before You Begin
The forms in this booklet are designed for electronic scanning that permits faster processing with fewer errors. To avoid unnecessary delays caused by manual processing, please follow the guidelines below:
Important: You must enter your social security number(s) in the appropriate boxes on the forms. Otherwise, we may be unable to process your return.
- Be sure to enter your complete address on your return, including your apartment number, if applicable.
- Make sure you have received all of your W-2s, 1099s, and other tax documents that you need to prepare your return.
- Do not submit photocopies of the return. Submit original forms only. Do not use any prior year forms.
- Use black or blue ink only. Do not use red ink or pencil.
- Write your numbers in the boxes.
- Do not use dollar signs ($), commas, decimal points, or other punctuation marks.
- Do not use brackets to indicate negative numbers. Negative numbers are indicated by filling in the circle next to the number.
- Do not enter zeros or draw lines in boxes where no data is required.
- Round off to the nearest whole dollar. Drop amounts under 50 cents and increase amounts from 50 cents to 99 cents to the next whole dollar.
- Use capital letters.
- Print letters and numbers.
- Fill in applicable circles completely.
The information contained in this booklet is to be used as a guide in the preparation of a North Carolina individual income tax return and is not intended to cover all provisions of the law.
The minimum gross income filing requirements under North Carolina law are different from the filing requirements under the Internal Revenue Code because North Carolina law does not adjust the standard deduction and personal exemption for inflation as required by the Internal Revenue Code.
Who is required to file a North Carolina individual income tax return?
- Every resident of North Carolina whose income for the taxable year exceeds the amount for his filing status shown in Chart A or B.
- Every part-year resident who received income while a resident of North Carolina or who received income while a nonresident attributable to the ownership of any interest in real or tangible personal property in North Carolina or derived from a business, trade, profession or occupation carried on in North Carolina, or is derived from gambling activities in North Carolina and whose total income for the taxable year exceeds the amount for his filing status shown in Chart A or B.
- Every nonresident who received income for the taxable year from North Carolina sources that was attributable to the ownership of any interest in real or tangible personal property in North Carolina or derived from a business, trade, profession, or occupation carried on in North Carolina, or is derived from gambling activities in North Carolina and whose total income from all sources both inside and outside of North Carolina equals or exceeds the amount for his filing status shown in Chart A or B.
- If you are eligible to claim the State Earned Income Tax Credit or if you had North Carolina income tax withheld during the year but your income is below the amount required for filing, as shown in Chart A or B, you must still file a return to receive a refund.
If you were not required to file a federal income tax return but your gross income from all sources both inside and outside of North Carolina equals or exceeds the amount for your filing status shown in Chart A or B, you must complete a federal return and attach it to your North Carolina income tax return to show how your federal adjusted gross income, deductions, and exemptions were determined.
You and your spouse must file a joint North Carolina return if you file a joint federal income tax return, and both of you were residents of North Carolina or both of you had North Carolina taxable income.
If you file a joint federal return and your spouse is a nonresident of North Carolina and had no North Carolina taxable income, you may file a joint State return. Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. However, you still have the option of filing your State return as married filing separately. If you choose to file a separate North Carolina return, you must complete either a federal return as married filing separately reporting only your income, deductions, and exemptions or a schedule showing the computation of your separate income, deductions, and exemptions and attach it to your North Carolina return. You must also include a copy of your joint federal return unless your federal return reflects a North Carolina address.
When filing a joint return, include the name and social security number of each spouse on the return. Both spouses are jointly and severally liable for the tax due on a joint return unless one spouse qualifies for innocent spouse relief for federal income tax purposes as a result of the “innocent spouse” rules provided under Internal Revenue Code Section 6015.
Chart A - For Most Taxpayers (See Chart B for children and other dependents)
|Filing Status||A Return is Required if Federal Gross Income Exceeds|
|Single (age 65 or over)||$ 6,250|
|(2)||Married - Filing Joint Return||$11,000|
|Married - Filing Joint Return (one age 65 or over)||$11,600|
|Married - Filing Joint Return (both age 65 or over)||$12,200|
|(3)||Married - Filing Separate Return||$ 2,500|
|(4)||Head of Household||$ 6,900|
|Head of Household (age 65 or over)||$ 7,650|
|(5)||Qualifying Widow(er) with dependent child.||$ 8,500|
|Qualifying Widow(er) (age 65 or over).||$ 9,100|
Filing Requirements for Children and Other Dependents
If another person (such as your parent) can claim you as a dependent on their federal income tax return, use Chart B on Page 5 to see if you must file a North Carolina income tax return.
Chart B – For Children and Other Dependents
Single dependents. Were you either age 65 or older or blind?
No. You must file a return if any of the following apply to you.
- Unearned income was over $500
- Earned income was over $3,000
- Gross income was more than the larger of
- $500, or
- Earned income (up to $2,750) plus $250
Yes. You must file a return if any of the following apply to you.
- Unearned income was over $1,250 ($2,000 if 65 or older and blind)
- Earned income was over $3,750 ($4,500 if 65 or older and blind)
- Gross income was more than
- $500, or
- Earned income (up to $2,750) plus $250
The larger of-
Plus This amount: $750 ($1,500 if 65 or older and blind)
Married dependents. Were you either age 65 or older or blind?
No. You must file a return if any of the following apply to you.
- Gross income was at least $10 and your spouse files a separate return and itemizes deductions.
- Unearned income was over $500
- Earned income was over $3,000
- Gross income was more than the larger of
- $500, or
- Earned income (up to $2,750) plus $250
Yes. You must file a return if any of the following apply.
- Unearned income was over $1,100 ($1,700 if 65 or older and blind)
- Earned income was over $3,600 ($4,200 if 65 or older and blind)
- Gross income was at least $10 and your spouse files a separate return and itemizes deductions
- Gross income was more than
The larger of-
- $500, or
- Earned income (up to $2,750) plus $250
Plus This amount: $750 ($1,200 if 65 or older and blind)
The Income Tax Return
All individuals (including part-year residents and nonresidents) must file their income tax return on Form D-400. If applicable, be sure to read the section entitled Information for Part- Year Residents and Nonresidents.
When to File
If you file your return on a calendar year basis, it is due on or before April 15 of the following year. A fiscal year return is due on the 15th day of the 4th month following the end of the taxable year. When the due date falls on a Saturday, Sunday, or holiday, the return is due on or before the next business day. A fiscal year return should be filed on a tax form for the year in which the fiscal year begins (For example: A 2012 tax form should be used for a fiscal year beginning in 2012).
Nonresident Aliens: Nonresident aliens are required to file returns at the same time they are required to file their federal returns.
If you cannot file your return by the due date, you may apply for an automatic 6-month extension of time to file the return. To receive the extension, you must file Form D-410, Application for Extension for Filing Individual Income Tax Return, by the original due date of the return. You can file Form D-410 online at www.dornc.com. Click on Electronic Services. You should apply for an extension even if you believe you will be due a refund but cannot file by the due date.
You are not required to send a payment of the tax you estimate as due to receive the extension; however, it will benefit you to pay as much as you can with the extension request. An extension of time for filing the return does not extend the time for paying the tax. If you do not pay the amount due by the original due date, you will owe a 10 percent late-payment penalty and interest. The late-payment penalty will not be due if you pay at least 90 percent of your tax liability through withholding, estimated tax payments, or with Form D-410 by the original due date.
A late-filing penalty may be assessed if your return is filed after the due date (including extensions). The penalty is percent per month ($5.00 minimum; 25 percent maximum) on the remaining tax due.
If you do not file the application for extension by the original due date of the return, you are subject to both a late-filing penalty and a late-payment penalty.
Out of the Country: If you were a U.S. citizen or resident and were out of the country on the regular due date of your return (April 15), you are granted an automatic 4-month extension for filing your North Carolina return if you fill in the “Out of the Country” circle on Page 1 of your return. ”Out of the Country” means you live outside the United States and Puerto Rico and your main place of work is outside the United States and Puerto Rico, or you are in military service outside the United States and Puerto Rico. The time for payment of the tax is also extended; however, interest is due on any unpaid tax from the original due date of the return until the tax is paid. If you are unable to file the return within the automatic 4-month extension period, an additional 2-month extension may be obtained by following the provisions in the first paragraph of this section; however, Form D-410 must be filed by the automatic 4-month extended date of August 15.
General Refund Information
If you owe another State or local agency, the amount you owe may be deducted from your refund. If you have an outstanding federal income tax liability, the Internal Revenue Service may claim your North Carolina refund.
Need to Call Us About Your Refund?
You can check the status of your refund at www.dornc.com. The automated refund inquiry line 1-877-252-4052 (toll-free) will also give you the status of your current refund. You can also obtain amended return refund information.
Service is available 24 hours a day seven days a week. You will need the first social security number and the amount of refund shown on your return when you call.
How to Pay Your Tax
If you owe additional tax, you can pay online by bank draft or credit or debit card using Visa or MasterCard. To pay online, go to the Department’s website at www.dornc.com and click on Electronic Services.
You can also pay by check or money order. Do not send cash. The Department will not accept a check, money order, or cashier’s check unless it is drawn on a U.S. (domestic) bank and the funds are payable in U.S. dollars. Make your check or money order payable to the N.C. Department of Revenue for the full amount due. Write “2012 D-400” and your name, address, and social security number on your payment. If you are filing a joint return, write both social security numbers on your payment in the order that they appear on the return. If you do not pay your tax online, you may go to our website and generate a personalized Form D-400V. Enclose the voucher with your return and payment, and mail to the address listed on page 4 of Form D-400. If you use tax software to prepare your return, be sure to include with your return and payment the Form D-400V generated by the software package.
Estimated Income Tax
You are required to pay estimated income tax if the tax shown due on your return, reduced by your North Carolina tax withheld and allowable tax credits, is $1,000 or more regardless of the amount of income you have that is not subject to withholding. Each payment of estimated tax must be accompanied by Form NC-40, North Carolina Individual Estimated Income Tax. If you are filing estimated tax for the first time, contact any of our offices so that appropriate forms can be mailed to you. You can also pay your estimated tax online at www.dornc.com. Click on Electronic Services.
You should prepare your estimated tax carefully, both to avoid having to pay a large amount of tax when you file your return, and to avoid owing interest for underpayment of estimated income tax. Payment of estimated tax does not relieve you of your responsibility for filing a return if one is due.
Statute of Limitations
Generally, to receive a refund, your return must be filed within three years from the date the original return was due or within two years after the tax was paid, whichever date is later. However, special rules extending the time for filing refund claims beyond the normal three-year statute of limitations apply to overpayments attributable to (1) worthless debts or securities, (2) capital loss carrybacks, or (3) net operating loss carrybacks. For overpayments resulting from worthless debts or securities, the period of time for demanding an overpayment is seven years; for overpayments resulting from capital loss or net operating loss carrybacks, the period of time is three years from the due date of the return for the year in which the loss was incurred rather than three years from the due date of the return for the year to which the loss is carried back.
To amend returns for tax years 2008 and prior, use Form D-400X, Amended North Carolina Individual Income Tax Return. To amend returns for tax years 2009 through 2011, you must complete a corrected Form D-400, Individual Income Tax Return with the amended indicator filled in for the tax year you are amending. You must also complete Form D-400X-WS, Worksheet for Amending Individual Income Tax Return, and attach it to the front of the corrected D-400, Individual Income Tax Return. Do not send a copy of the original return. Important: For tax year 2012, use Form D-400X, Amended North Carolina Individual Income Tax Return for filing a 2012 amended return. Amended returns on which you owe additional tax are required to be filed and the tax paid within three years after the date on which the original return was filed or within three years from the date required by law for filing the return, whichever is later.
If changes are made to your federal return by the Internal Revenue Service, you must report the changes to the State by filing an amended return within six months from the date you receive the report from the Internal Revenue Service. If you do not amend your State return to reflect the federal changes and the Department of Revenue receives the report from the Internal Revenue Service, an assessment may be made by the Department within three years from the date of receipt of the report, and you forfeit your right to any refund which might have been due by reason of the changes.
Penalties and Interest
Failure to file penalty. Returns filed after the due date are subject to a penalty of 5 percent of the tax for each month, or part of a month, the return is late (minimum $5.00; maximum 25 percent of the additional tax). If you file your return late, figure the amount of the penalty and add it to the tax due.
Failure to pay penalty. Returns filed after April 15 without a valid extension are subject to a latepayment penalty of 10 percent of the unpaid tax. If you have an extension of time for filing your return, the 10 percent penalty will apply on the remaining balance due if the tax paid by the original due date of the return is less than 90 percent of the total amount of tax due. If the 90 percent rule is met, any remaining balance due, including interest, must be paid with the income tax return on or before the extended due date to avoid the latepayment penalty. The minimum penalty is $5.00. If your payment is late, figure the amount of the penalty and add it to the tax due.The late-payment penalty will not be assessed if the amount shown due on an amended return is paid with the return. Proposed assessments of additional tax due are subject to the 10 percent late-payment penalty if payment of the tax is not received within 45 days of the assessment.
Other penalties. There are other penalties for negligence, filing a frivolous return, and fraud. Criminal penalties also apply for fraud with intent to evade or defeat the tax and for willful failure to file a return, supply information, or pay the tax. Collection Assistance Fee. Any tax, penalty, and interest not paid within 90 days after the debt becomes collectible is subject to a 20 percent collection assistance fee.
Interest. Interest is due on tax not paid by April 15, even though you may have an extension of time for filing your return. You may obtain the current interest rate from any of the Department’s offices. If you pay your tax late, figure the amount of interest due and include it with the tax and any applicable penalty.
Interest on the underpayment of estimated tax. Compute interest on any underpayment of estimated income tax on Form D-422, Underpayment of Estimated Tax by Individuals. Interest is not due if each payment equals 25 percent of the lesser of 90 percent (66 2/3 percent for farmers and fishermen) of the tax due on your current year’s return or 100 percent of the tax due on your previous year’s return. If interest is applicable, add the interest to the tax due, and include the full payment with your return. If a refund is due, subtract the amount of the interest from the refund.
N.C. Public Campaign Fund
You may designate $3.00 of the taxes you pay to this Fund. (Married couples filing a joint return may each make a spousal designation if their income tax liability is $6.00 or more.) The N.C. Public Campaign Fund provides an alternative source of campaign money to qualified candidates who accept strict campaign spending and fund-raising limits. The Fund also helps finance a Voter Guide with educational materials about voter registration, the role of the appellate courts, and the candidates seeking election as appellate judges in North Carolina. Three dollars from the taxes you pay will go to the Fund if you mark an agreement. Regardless of what choice you make, your tax will not increase, nor will any refund be reduced.
N.C. Political Parties Financing Fund
You may designate $3.00 of the taxes you pay for use by the Democratic, Republican, or Libertarian Party. (Married couples filing a joint return may make a spousal designation only if their income tax liability is $6.00 or more.) If you do not wish to specify a party but wish to designate $3.00, fill in the “Unspecified” circle and the amount you designate will be distributed on a prorata basis according to party voter registration. A political party is defined under election laws of this State as either: Any group of voters which, received at least 2 percent of the entire vote cast in the State for Governor or for president; or any group of voters which filed with the State Board of Elections petitions to form a new party equal to 2 percent of the total number of voters who voted in the most recent general election for Governor.
United States Armed Forces Pay
If you are serving in the United States Armed Forces and your legal residence is North Carolina, you are liable for North Carolina income tax and North Carolina income tax should be withheld from your pay regardless of where you may be stationed. If you are a legal resident of another state stationed in North Carolina on military orders, you are not liable for North Carolina income tax on your military pay, but income from other employment, a business, or tangible property in North Carolina is subject to North Carolina income tax.
The Military Spouses Residency Relief Act of 2009 prohibits North Carolina from taxing the income earned for services performed in North Carolina by a spouse of a servicemember stationedin North Carolina if (1) theservicemember is present in North Carolina solely in compliance with military orders; (2) the spouse is in North Carolina solely to be with the servicemember; and ( ) the spouse is domiciled in the same state as the servicemember. If all three of the conditions are met, an employer is not required to withhold North Carolina tax from wages paid to such military spouses. A spouse who does not meet these requirements should see “Information for Part-Year Residents and Nonresidents” below regarding the filing of their return. The Act does not apply to military spouses who are domiciled in North Carolina. Withholding from wages paid to military spouses domiciled in North Carolina is still required.
Death of the Taxpayer
If you are the spouse or personal representative of an individual who died prior to filing a return, you may be required to file a return on the decedent’s behalf. If so, enter the date of death in the applicable box on Page 1 of Form D-400 to indicate the return is being filed for a deceased individual.
An Income Tax Return for Estates and Trusts, Form D-407, must be filed for an estate for the period from the date of death to the end of the taxable year if the estate had taxable income from North Carolina sources or income which was for the benefit of a North Carolina resident, and the estate is required to file a federal return for estates and trusts.
If you are filing a return for an unmarried individual who died during the year, enter the date of death in the applicable box and enter the name of the deceased and the address of the executor, administrator, or court-appointed representative. The executor, administrator, or court-appointed representative should fill in the circle above the deceased taxpayer information on Page 1 and sign the return. When filing a separate return for a decedent who was married at the time of death, enter the date of death, the name of the deceased, and the address of the surviving spouse. The surviving spouse should sign the return. In either case, be sure to enter the date of death in the space provided.
If you are a court-appointed representative, attach to the return a copy of the certificate that shows your appointment. A refund due on a return filed for a deceased taxpayer by a person other than a surviving spouse, executor, administrator or a court-appointed representative will be mailed to the Clerk of Superior Court of the county in which the taxpayer resided.
Information for Part-Year Residents and Nonresidents
If you move your legal residence into or out of North Carolina during the tax year, you are a resident of two different states during two different periods of the tax year.
You are a nonresident if you maintain your legal residence in another state or country even though you may temporarily reside in North Carolina. If you reside in North Carolina for more than 183 days of a tax year, you are presumed to be a resident for income tax purposes in the absence of factual proof of residence in another state. However, your absence from North Carolina for more than 183 days raises no presumption that you are not a resident.
If you file a joint federal return and your spouse is a nonresident of North Carolina and had no North Carolina taxable income, you may file a joint State return. However, you still have the option of filing your State return as married filing separately. If you choose to file a separate North Carolina return, you must complete either a federal return as married filing separately reporting only your income, deductions, and exemptions or a schedule showing the computation of your separate income, deductions, and exemptions and attach it to your North Carolina return. You must also include a copy of your joint federal return unless your federal return reflects a North Carolina address. Note: Itemized nonbusiness deductions of a husband and wife may be claimed by a spouse only if that spouse was obligated to pay the items and actually paid the amount during the year. In the case of a joint obligation (such as mortgage interest and real estate taxes), the deduction is allowable to the spouse who actually paid the item.
Part-year residents and nonresidents receiving income from North Carolina sources must determine the portion of their federal gross income, as adjusted, that is subject to North Carolina income tax by completing Lines 51 through 53 on Page 4 of Form D-400. See the instructions for Lines 51 and 52 on Page 15.
A part-year resident receiving partnership income from a partnership doing business in North Carolina and in one or more other states must prorate his share of the partnership’s income attributable and not attributable to North Carolina between his periods of residence and nonresidence in accordance with the number of days in each period. Include on Line 51 your share of partnership income determined for the period of residence and your share of the partnership income attributable to North Carolina during the period of nonresidence.
If you have income from sources within another state or country while you are a resident of North Carolina and the other state or country taxes you on such income, you may be eligible to claim a tax credit on your North Carolina return. See “Credit for Tax Paid to Another State or Country” on Page 16 for additional information.
Line Instructions for Filing Form D-400
The references to line numbers on federal income tax forms were correct at the time of printing. If they have changed and you are unable to determine the proper line to use, please contact the Department of Revenue.
Lines 1 through 5 - Filing Status
Check the same filing status you checked on your federal return. Important: If either you or your spouse is a nonresident and had no North Carolina taxable income for the tax year, see page 4.
Line 6 - Federal Adjusted Gross Income
from your federal return. If federal adjusted gross income is a negative number, enter the negative amount and fill in the circle to indicate that the amount is negative. (Note: If you are completing a web fill-in form on the Department’s website, enter a minus sign to indicate a negative number.)
Line 11 - N.C. Standard Deduction or N.C. Itemized Deductions
IMPORTANT: Do not enter the amount from your federal income tax return on Line 11, Form D-400. You must fill in the applicable circle on Form D-400. Under no circumstances should both circles be filled in.
You may deduct the N.C. standard deduction or itemized deductions using the itemized deduction worksheet on Page 9. If you did not itemize your deductions on your federal return, you may take the standard deduction on your North Carolina return. If you itemized on your federal return, you may either itemize or claim the standard deduction. However, if you are (1) married filing a separate return for federal income tax purposes and your spouse itemizes deductions, or (2) a nonresident alien, or (3) filing a short-year return because of a change in your accounting period, you are not entitled to the standard deduction. Note: A short-year return does not relate to a taxpayer who files a return as a part-year resident.
North Carolina Standard Deduction. You must use the appropriate chart or worksheet on the next page, whichever applies, to determine the amount of your North Carolina standard deduction to enter on line 11.
Line 17 - North Carolina Taxable Income
- If you were a resident of North Carolina for the entire year, enter the amount from Line 15 on Line 17.
- If you were a part-year resident or a nonresident you must complete Lines 51 through 53 and enter on Line 16 the decimal amount from Line 53. Multiply the amount on Line 15 by the decimal amount on Line 16 and enter the result on Line 17.
Part-year residents and nonresidents should read the instructions listed on Page 7 for additional information and complete the worksheet for Lines 51 and 52 on Page 16.
Line 18 -North Carolina Income Tax
To calculate your tax, use one of the following methods:
North Carolina Tax Table. Use the Tax Table beginning on Page 22 to determine your tax if your taxable income on Line 17 is less than $68,000. Be sure to use the correct column in the Tax Table. After you have found the correct tax, enter that amount on Line 18.
Tax Rate Schedule. Use the Tax Rate Schedule on Page 30 to calculate your tax if your taxable income is $68,000 or more. Enter the amount on Line 18.
Line 19 - Tax Credits
See Page 16 for information about tax credits. Complete Form D-400TC, Individual Tax Credits, if you are entitled to one or more of the credits.
Line 21 – Consumer Use Tax
North Carolina use tax is due by individuals and businesses on purchases, leases, and rentals of tangible personal property and certain digital property purchased, leased or rented inside or outside this State for storage, use, or consumption in North Carolina. Use tax is due on taxable services sourced to North Carolina. Individuals and businesses must pay use tax when retailers do not collect tax on taxable transactions.
Out-of-state retailers that are not “engaged in business” in this State are not required to collect North Carolina’s tax. Some out-of-state retailers voluntarily collect North Carolina tax as a convenience to their customers. Out-of-state retailers include mail-order companies, television shopping networks, firms selling over the internet, and other retailers.
Items subject to sales and use tax include but are not limited to the following:
- Computers and other electronic equipment,
- Prewritten software including electronic downloads of software,
- Books, books on tape, and digital books delivered or accessed electronically,
- Audio compact discs, tapes, and records,
- Digital music delivered or accessed electronically,
- Magazines and newspapers including those delivered or accessed electronically,
- Clothing, appliances, furniture, home furnishings, sporting goods, and jewelry,
- Movies delivered or accessed electronically,
- Sales or recharges of prepaid telephone calling cards and phones.
The use tax is calculated at the same rate as the sales tax. For January 1, 2012 through March 31, 2012, the rate was 7.25% in Mecklenburg County, 7% in Alexander, Cabarrus, Catawba, Cumberland, Duplin, Halifax, Haywood, Hertford, Lee, Martin, New Hanover, Onslow, Pitt, Randolph, Robeson, Rowan, Sampson, Surry and Wilkes Counties, and 6.75% in all other counties. For April 1, 2012 through December 31, 2012, the rate was 7.25% in Mecklenburg County, 7% in Alexander, Buncombe, Cabarrus, Catawba, Cumberland, Duplin, Durham, Halifax, Haywood, Hertford, Lee, Martin, Montgomery, New Hanover, Onslow, Orange, Pitt, Randolph, Robeson, Rowan, Sampson, Surry and Wilkes Counties, and 6.75% in all other counties. If you paid another state’s sales or use tax that was legally due on out-of-state purchases, that amount may be credited against the North Carolina use tax due. You may not claim a credit for sales tax or value-added tax paid to another country.
You should report use tax on purchases of food subject to the reduced rate of tax on Form E-554 and use tax on purchases of boats and aircraft on Form E-55.
Lines 23a and 23b - N.C. Income Tax Withheld
Enter your North Carolina tax withheld on Line 23a. If you are married and you file a joint return, enter your North Carolina withholding on Line 23a and your spouse’s withholding on Line 23b. Do not include any income tax withheld by a state other than North Carolina or any other tax amounts that were withheld.
Be sure to attach your original or a copy of the original State wage and tax statements (Form W2), 1099 statements, or other statements verifying North Carolina tax withheld to your return. It is not necessary to attach 1099 statements on which no North Carolina income tax withheld is reported unless you are claiming a Bailey retirement deduction (See Line Instructions for Line 41). Wage and tax statements or 1099 statements generated by tax software programs cannot be used to verify North Carolina tax withholding.
Line 24 - Other Tax Payments
a - 2012 Estimated Tax - Enter any estimated income tax payments for 2012 (including any portion of your 2011 refund that was applied to your 2012 estimated income tax). See Page for additional information about estimated income tax.
b - Paid with Extension - If you filed an automatic extension of time, enter the amount of North Carolina income tax paid with the extension.
c - Partnership - If you are a nonresident partner, enter your share of the tax paid to North Carolina by the manager of the partnership on your distributive share of the partnership income. Include with your return a copy of Form NC K-1 for Form D-403 provided by the partnership to verify the amount claimed.
d - S Corporation -f you are a nonresident shareholder of an S corporation, enter your share of the income tax paid to North Carolina by an S corporation on your distributive share of the S corporation income. Include with your return a copy of Form NC K-1 for Form CD401S provided by the S corporation to verify the amount claimed.
Line 25 - N.C. Earned Income Tax Credit
See Page 17 for information about the State Earned Income Tax Credit. Complete Part of Form D-400TC to determine the allowable credit.
Lines 27a through 27d - Tax, Penalties, and Interest
a - If Line 22 is more than Line 26, you owe additional tax. Subtract Line 26 from Line 22 and enter the result on Line 27a.
b - Penalties - See “Penalties” on Page 6 to determine if any other penalties apply to you.
c - Interest - See “Interest” on Page 6 to determine if you owe interest.
d - Interest on the Underpayment of Estimated Income Tax and Exceptions - You may owe interest if you underpaid your estimated tax for any payment period. You will not owe interest if you had no tax liability in the prior year or if this year’s tax liability, less any amount withheld and allowable tax credits, is less than $1,000. Complete Form D422 to see if you owe interest. Enter the interest on Line 27d. The interest will increase your tax liability or reduce your overpayment. You do not have to attach Form D-422 or Form D-422A to your return; however, maintain the form for your records.
Exception to Underpayment of Estimated Tax:
- Enter an “F” in the box if you are a farmer or fisherman. You will not owe interest if you are a farmer or fisherman and pay the tax due by March 1, 2013. You are a farmer or fisherman if you received at least two-thirds of your gross income for the year from farming and fishing.
- Enter an “A” in the box if you completed Form D-422A, Annualized Income Installment Worksheet, in determining the amount to enter on Line 27d.
Line 28 - Pay This Amount
Add Lines 27a, 27b, 27c and 27d and enter the total on Line 28. This is the total tax, penalties, and interest due. Mail your return and payment to the North Carolina Department of Revenue, P. O. Box 25000, Raleigh, North Carolina 276400640. Make your check or money order payable to the NC Department of Revenue. Important: The Department will not accept a check, money order, or cashier’s check unless it is drawn on a U.S. (domestic) bank and the funds are payable in U.S. dollars.
You may also pay electronically or generate a personalized payment voucher Form D-400V by visiting www.dornc.com.
Line 29 - Overpayment
If Line 26 is more than Line 22, you have overpaid your tax. Subtract Line 22 (and any amount shown on Line 27d) from Line 26 and enter the amount of the overpayment on Line 29.
Line 30 -Estimated Income Tax
If you have overpaid the tax, you may elect to have your refund applied to your estimated tax for the following year by entering the amount to be applied on Line 30. The election cannot be changed after you file your return. The last allowable date for making a 2013 estimated tax payment is January 15, 2014; therefore, to apply a portion of your refund to 2013 estimated tax, you must file your 2012 return by January 15, 2014.
Line 31 - N. C. Nongame and Endangered Wildlife Fund
Help keep North Carolina wild by contributing any portion of your refund to the N.C. Nongame and Endangered Wildlife Fund. Your tax deductible contributions are essential to monitoring and managing our wildlife populations, including turtles, flying squirrels, frogs, mussels, salamanders, and hundreds of bird species from terns and pelicans to woodpeckers and warblers. Conserving these species and their habitats is important to our state, our economy, and our quality of life. If wildlife conservation is important to you, please give what you can and help conserve North Carolina’s wildlife for future generations to enjoy.
If you wish to contribute to the Fund, enter the amount of your contribution on Line 31. Your election to contribute to the Fund cannot be changed after you file your return. If you are not due a refund, you may still contribute to this Fund by donating online or mailing your donation directly to the North Carolina Wildlife Resources Commission, 1702 Mail Service Center, Raleigh, North Carolina 27699-1702. Checks should be made payable to the Nongame & Endangered Wildlife Fund. For more information about the Fund or to donate online, check out www.ncwildlife.org/give.
Line 33 -Amount to be Refunded
If you are due a refund, mail your return to the North Carolina Department of Revenue, P.O. Box R, Raleigh, North Carolina 27634-0001. Refunds of less than $1.00 are made only upon written request.
Adjustments to Federal Adjusted Gross Income
You must make certain adjustments to your federal adjusted gross income (Line 6) in arriving at your modified adjusted gross income (Line 10). The law may require other adjustments that are not included in these instructions. Follow the Line Instructions beginning on this page to determine the adjustments that apply to you.
Additions to Federal Adjusted Gross Income (Lines 34 - 37)
Line 34 - Interest Income
Enter the amount of interest received from notes, bonds, and other obligations of states and political subdivisions other than North Carolina if not included in federal adjusted gross income. This includes exempt interest dividends received from regulated investment companies (mutual funds) to the extent such dividends do not represent interest from obligations of North Carolina or its political subdivisions.
Line 35 - Adjustment for Bonus Depreciation
The federal Small Business Jobs Act of 2010 extendedthe50percentbonusdepreciationthrough 2011. Subsequentto this Act,the federal Tax Relief Act of 2010 extended the bonus depreciation from 50 percent to 100 percent for qualified property acquired and placed in service after September 8, 2010 and before January 1, 2012. The Act makes 50 percent bonus depreciation available for qualified property placed in service after December 31, 2011 and before January 1, 2013. Certain long-lived property and transportation property is eligible for 100 percent expensing if placed in service before January 1, 2013. North Carolina did not adopt the bonus depreciation provisions under IRC sections168 (k) and 168(n) of these Acts. Therefore, if you deducted the bonus depreciation under IRC sections 168(k) or 168(n) on your 2012 federal return, you must add to federal adjusted gross income 85% of the amount deducted. This adjustment does not result in a difference in basis of the affected assets for State and federal income tax purposes.
Note: Any amount of the bonus depreciation added to federal adjusted gross income on your 2012 State return may be deducted in five equal installments over your first five taxable years beginning with the tax return for taxable year 2013.
Line 36 - Other Additions to Federal Adjusted Gross Income
- North Carolina does not allow the domestic production activities deduction. Therefore, if you claimed the deduction on Line of federal Form 1040, the amount claimed must be added to federal adjusted gross income on Line 36, Form D-400.
- If you elected to exclude a lump-sum distribution from a retirement plan from your regular federal income tax computation and computed the tax separately, the amount of the lump-sum distribution must be added to federal adjusted gross income.
- If you carry over a net operating loss from another year to the 2012 return, an addition is required for the amount of net operating loss carried to the 2012 year that is not absorbed and will be carried forward to subsequent years.
Example: You incur a net operating loss of $75,000 in 2011. You carry the net operating loss to the 2012 federal return and deduct the entire loss in arriving at federal adjusted gross income. Only $50,000 of the loss is absorbed and $25,000 is carried forward to subsequent years. To determine North Carolina taxable income, you must make an addition to federal adjusted gross income of $25,000.
- If you are a shareholder in an S Corporation that paid built-in gains tax for federal income tax purposes, you must add to federal adjusted gross income your share of the built-in gains tax that the S Corporation paid.
- You must add to federal adjusted gross income any amount that was contributed to North Carolina’s National College Savings Program (NC 529 Plan) and deducted in a prior year that was later withdrawn and used for purposes other than the qualified higher education expenses of the designated beneficiary unless the withdrawal was due to the death or permanent disability of the designated beneficiary.
- If you qualified and elected to report your child’s unearned income on your federal return, you included only the child’s unearned income in excess of $1,900 in your federal adjusted gross income. The difference in the child’s standard deduction of $500 and the amount of his income not included in your federal adjusted gross income must be added to your federal adjusted gross income in figuring your North Carolina taxable income.
Example: Susan, age 10, received $2,000 in interest income in 2012. She had no other income. Her parents include $100 ($2,000-$1,900) of her income in their federaladjustedgrossincome. InfiguringtheirState taxable income, Susan’s parents must add $1,400 to federal adjusted gross income in figuring their North Carolina taxable income.
Susan’s unearned income ................$2,000
Amount included in parents’
federal income ......................................100
Amount not included in
parents’ federal income ....................$1,900
Susan’s standard deduction ..................500
Addition to federal adjusted
gross income on parents’ return .......$1,400
Deductions From Federal Adjusted Gross Income (Lines 38 -50)
Line 38 - State Income Tax Refund
Enter the amount of any state or local income tax refund included on Line 10 of your federal return, Form 1040.
Line 39 - Interest From United States Obligations
Enter the amount of interest received from notes, bonds, and other obligations of the United States (such as U.S. savings bonds, treasury notes and bills, etc.) or United States possessions.
Line 40 - Taxable Portion of Social Security and Railroad Retirement Benefits
Social security and railroad retirement benefits are not subject to State income tax. Enter any Title 2 social security benefits received under the Social Security Act and any Tier 1 or Tier 2 railroad retirement benefits received under the Railroad Retirement Act that were included in federal adjusted gross income. Railroad Retirement Act benefits include railroad unemployment insurance benefits and railroad sickness benefits.
Line 41 - Retirement Benefits Received by Vested Government Retirees (Bailey Settlement)
As a result of the North Carolina Supreme Court’s decision in Bailey v. State of North Carolina, North Carolina may not tax certain retirement benefits received by retirees (or by beneficiaries of retirees) of the State of North Carolina and its local governments or by United States government retirees (including military). The exclusion applies to retirement benefits received from certain defined benefit plans, such as the North Carolina Teachers’ and State Employees’ Retirement System, the North Carolina Local Governmental Employees’ Retirement System, the North Carolina Consolidated Judicial Retirement System, the Federal Employees’ Retirement System, or the United States Civil Service Retirement System, if the retiree had five or more years of creditable service as of August 12, 1989. The exclusion also applies to retirement benefits received from the State’s §401(k) and §457 plans if the retiree had contributed or contracted to contribute to the plan prior to August 12, 1989. The exclusion does not apply to local government §457 plans or to §403(b) annuity plans. Benefits from other State, local, and federal retirement plans may or may not be excluded depending on rulings in the Bailey case. The exclusion does not apply to retirement benefits paid to former teachers and state employees of other states and their political subdivisions.
A retiree entitled to exclude retirement benefits from North Carolina income tax should claim a deduction on Line 41 for the amount of excludable retirement benefits included in federal adjusted gross income. Even if all your retirement is excludable under Bailey, you must still file a North Carolina return if you meet the minimum gross filing requirements on Page 4. Important: If you qualify for this deduction, you do not qualify for the deduction for retirement benefits of up to $4,000 for the same federal, state, and local government retirement benefits. A copy of Form 1099-R or W-2 received from the payer must be attached to the return to support the deduction.
Line 42 - Other Retirement Benefits
You may deduct a portion of other retirement benefits included in federal adjusted gross income. Retirement benefits are amounts paid by an employer to a former employee or to a beneficiary of a former employee under a written retirement plan established by the employer to provide payments to an employee or beneficiary after the employee ends employment with the employer where the right to receive the payments is based upon the employment relationship. For self-employed individuals, retirement benefits are amounts paid to an individual (or beneficiary) under a written retirement plan established by the individual to provide payments after self-employment ends.
Retirement benefits also include amounts received from an individual retirement account or from an individual retirement annuity (IRA) and long-term disability benefits received under the Disability Income Plan of North Carolina. Retirement benefits do not include short-term disability benefits from the Disability Income Plan of North Carolina or distributions paid to an employee from an employer’s retirement plan because of a change in the structure of a corporate employer.
Federal, State, and Local Government Retirement Benefits. Important: The following instructions apply to you if you received retirement benefits as a former employee of the State of North Carolina or any of its local governments or as a former employee of the federal government and you did not have five years of service with the government as of August 12, 1989, or if you received retirement benefits as a former employee of any other state or from a local government §457 plan. Otherwise, see the Line 41 instructions on page 13. If you received retirement benefits from one or more federal, state, or local government retirement plans, you may deduct the amount included in federal adjusted gross income or $4,000, whichever is less. Married individuals filing a joint return where both received such retirement benefits may each deduct up to $4,000 for a potential deduction of $8,000.
Private Retirement Benefits. If you received retirement benefits from one or more private retirement plans other than federal, state, or local government retirement plans, you may deduct the amount included in federal adjusted gross income or $2,000, whichever is less. Married individuals filing a joint return where both received such retirement benefits may each deduct up to $2,000 for a potential deduction of $4,000.
The total retirement benefits deduction may not exceed $4,000 per taxpayer. For married couples filing a joint return where both spouses received retirement benefits, the deduction applies separately to each, so that the maximum deduction on a joint return is $8,000.
If you included retirement benefits in federal adjusted gross income, complete the Retirement Benefits Worksheet and enter the result on Form D-400, Line 42.
Retirement Benefits Worksheet
|1. Enter the federal, state, or local government retirement benefits included in federal adjusted gross income not to exceed $4,000 for each taxpayer who received government retirement benefits||
|2. Enter the private retirement benefits included in federal adjusted gross income not to exceed $2,000 for each taxpayer who received retirement benefits||
|3. Add Lines 1 and 2 and enter the total here not to exceed $4,000 for each taxpayer||
|4. Add the amounts on Line 3 and enter the total here and on Form D-400, Line 42||
Important: If you claim a deduction on Line 41 for retirement benefits received as a result of the Bailey settlement, you cannot claim the deduction of up to $4,000 for the same federal, state, or local government retirement benefits.
Line 43 - Severance Wages
You may deduct up to $35,000 of any severance wages you received as a result of your permanent involuntary termination from employment through no fault of your own. The severance wages deducted as a result of the same termination may not exceed $35,000 for all taxable years in which the wages were received. “Stay on pay” does not qualify for the deduction.
Severance wages do not include payments that represent compensation for past or future services. Compensation for past or future services includes payment for accumulated sick leave, vacation time, other unused benefits, bonuses based on job performance, or payments in consideration of any agreement not to compete.
Line 44 - Adjustment for Bonus Depreciation Added Back in 2008, 2009, 2010 and 2011
North Carolina did not adopt the 50 percent bonus depreciation provisions in IRC section 168(k) for tax year 2008 or in IRC sections 168(k) or 168(n) for tax years 2009 and 2010. Similarly, North Carolina did not adopt the provisions of the Small Business Jobs Act of 2010 which extended the 50 percent bonus depreciation through 2011 or the Tax Relief Act of 2010 which doubled and extended bonus depreciation from 50 percent to 100 percent for qualified property acquired and placed in service after September 8, 2010 and before January 1, 2012. The Tax Relief Act makes 50 percent bonus depreciation available for qualified property placed in service after December 31, 2011 and before January 1, 2013. Certain long-lived property and transportation property is eligible for 100 percent expensing if placed in service before January 1, 2013. Any amount added to federal taxable income on the 2008, 2009, 2010, and 2011 State returns may be deducted in five equal installments beginning with the 2009, 2010, 2011, and 2012 State returns, respectively. Therefore, enter 20 percent of the bonus depreciation added back on the 2008, 2009, 2010 and 2011 State returns.
Line 45 - Adjustment for Section 179 Expense Added Back in 2010 and 2011
North Carolina did not conform to the increased expense deduction or increased investment limit for section 179 property but rather maintained the expense deduction and investment limit allowed under the Internal Revenue Code as of May 1, 2011. Any amount added to federal taxable income on your 2010 and 2011 returns may be deducted in five equal installments beginning with the 2011 and 2012 State returns, respectively. Therefore, enter 20 percent of the section 179 expense deduction added back on your 2010 and 2011 State returns.
Line 46 - Contributions to NC College Savings Program
You may deduct up to $2,500 ($5,000 on a joint return) for contributions made during the taxable year to an account in the Parental Savings Trust Fund of the State Education Assistance Authority (North Carolina’s National College Savings Program - NC 529 Plan), regardless of your income level.
Line 47 - Adjustment for Absorbed Non-ESB NOL Added Back in 2003, 2004, 2005, and 2006
North Carolina did not adopt the federal five year net operating loss (NOL) carry back provision authorized by the Worker, Homeownership, and Business Assistance Act of 2009. Relief was to be provided in future years for the portion of the individual’s 2008 and 2009 NOL that was not attributable to an Eligible Small Business. An addition to federal taxable income was required for the amount of any 2008 and 2009 NOL claimed under WHBAA beyond the standard two year period. If you made the required addition, you may deduct one-third of the 2008 NOL absorbed on your 2003, 2004, and 2005 federal returns and one-third of the 2009 NOL absorbed on your 2004, 2005, and 2006 federal returns on your 2011, 2012, and 2013 State returns. For additional information see our website www. dornc.com.
Line 48 - Adjustment for Net Business Income That is Not Considered Passive Income
Certain taxpayers are allowed a deduction of up to $50,000 of net business income included in federal adjusted gross income that is not considered passive under the Internal Revenue Code. In the case of a married couple filing a joint return where both spouses report a net business income, the maximum dollar amount applies separately to each spouse’s net business income included in federal adjusted gross income, not to exceed a total of $100,000 (maximum $50,000 each). For additional information please refer to our websitehttp://www.dornc.com/practitioner/individual/directives/index.html.
Line 49 - Other Deductions From Federal Adjusted Gross Income
- You may deduct $250 if you were an unpaid volunteer firefighter or an unpaid volunteer rescue squad worker who attended at least 36 hours of fire department drills and meetings or 36 hours of rescue squad training and meetings during 2012.An individual may not claim a deduction as both a volunteer firefighter and a volunteer rescue squad worker. In the case of a married couple filing a joint return, each spouse may qualify separately for the deduction.
- If you itemized your deductions and claimed the mortgage interest tax credit on your federal return because you participated in the mortgage credit certificate (MCC) program, you may deduct the amount shown on Line of Federal Form 8396.
- A $250 educator expense deduction will be allowed on the North Carolina return for 2012 to the extent a deduction has not been claimed in determining federal adjusted gross income. This deduction is allowed only to the extent the expense has not been claimed under section162 of the Internal Revenue Code for the taxable year. In the case of a married couple filing a joint return where both spouses are eligible educators, the maximum amount is $500.
Lines 51 and 52 - Part-Year Resident/Nonresident Worksheet
If you were a part-year resident of North Carolina during the taxable year 2012 OR if you were a nonresident and you received income from North Carolina sources, you must complete the worksheet on Page 16 to determine the portion of federal gross income, as adjusted, that is subject to North Carolina income tax. After you complete the worksheet, enter the amount from Column B, Line 33 on Form D-400, Line 51. Enter the amount from Column A, Line 33 on Form D-400, Line 52.
In Column B, enter only the portion of the North Carolina additions and deductions shown in Column A that are applicable to North Carolina. For example, if you received interest income from United States obligations of $1,200 evenly during the year and you became a North Carolina resident on July 1, you should enter $1,200 on Line 22 of Column A and $600 on Line 22 of Column B.