Payroll tax in North Carolina: What employers need to know [2024]

North Carolina taxes aren’t as steep as many other states, but it's crucial to know your filing obligations for employees who live and work there. Federal schemes like FICA taxes (including social security and Medicare taxes) are just a piece of the puzzle—you also have to account for state income taxes and unemployment insurance, and know your filing terms, which vary depending on how much you withhold monthly. 

So whether you’re starting a small business in North Carolina or running a global company with North Carolina employees, read on for everything you need to know about the state’s withholding tax requirements. 

North Carolina's payroll taxes

The North Carolina Department of Revenue (NCDOR) administers the state's payroll taxes. Employers are required to withhold taxes from paychecks for any North Carolina resident employees or nonresident employees working within state boundaries. To ensure your employee is accounted for in your tax burden, make sure to use the New Hire Reporting Directory to register workers you recently put on payroll. North Carolina doesn’t impose any local taxes, but it does levy a state income tax and run its own unemployment fund. 

Also keep in mind that while state law requires most North Carolina businesses with more than three employees to get workers’ compensation coverage (with exemptions for some railroad workers, farm workers, and federal employees) through the North Carolina Industrial Commission, employers don’t pay taxes on this benefit. 

Learn more about North Carolina's payroll taxes below.

Unemployment insurance tax

The Employment Security office in North Carolina’s Department of Commerce oversees State Unemployment Insurance (SUI), which offers temporary payments to employees who lost their jobs for reasons outside of their control. Employers contribute to this fund by withholding taxes on their employees’ behalf and filing a Quarterly Tax and Wage Report (Form NCUI 101).

SUI tax rates are calculated using an “experience rating” system, which changes according to payroll, history of taxes paid, and whether those past taxes were filed on time. Credits from past payroll balances are applied to yield an Employer’s Reserve Ratio Percentage (ERRP), which is then used to determine the SUI contribution rate.

Visit the North Carolina Department of Commerce’s website for more information on employer tax rates for SUI. Keep in mind that this state-run unemployment fund is separate from requirements under the Federal Unemployment Taxes Act (FUTA), which is taxed at 6% of the first $7,000 of taxable wages. 

State income tax

North Carolina levies individual income taxes at a flat rate which, as of 2024, is set at 4.5%, but will fluctuate as follows:

North Carolina employers of state residents or nonresidents working in the state to withhold this state income tax from employee wages and remit them to the NCDOR. 

Since North Carolina’s payroll tax laws have niche requirements that can seem overwhelming, like calculating unemployment contributions using a complicated ratio, Rippling’s payroll compliance software is here to help. 

Rippling automatically calculates your taxes and submits your tax forms and employer withholdings on your behalf. The system handles taxes at the federal and North Carolina state and local levels to monitor compliance and prevent infractions. What’s more, Rippling’s PEO can register and maintain your state tax accounts for you, automating even more of the payroll tax process.

Payroll tax due dates in North Carolina

The table below lists the different filing frequencies and due dates for the North Carolina withholding tax.

If the due dates fall on a weekend or holiday, filings are due the following business day. Failing to file on time incurs a 5% penalty, which repeats every month you don’t file. If you’re struggling with withholding tax obligations, you can visit one of NCDOR’s Taxpayer Service Centers and look into a payment plan. 

How to submit payroll taxes in North Carolina

Once you know which payroll taxes employers are on the hook for and when those taxes are due, the next step is paying them. Employers filing quarterly and monthly need to file a North Carolina Withholding Return (Form NC-5 and NC-5P), where you’ll need to include your NC Tax Withholding Identification Number (which you get through registering your business) along with an Employer Identification Number (EIN) from the IRS or a Social Security Number. Semi-weekly filers need to fill out a separate eNC5Q form. 

Employers filing withholding taxes also have to file reconciliation forms (Form NC-3) every year. You can call the NCDOR at 1-877-252-3052 for assistance preparing your forms, and you can also consult the agency’s 2024 employer booklet for more information on withholding requirements. 

Once you have all the information and paperwork you need, you can file and remit your tax via the North Carolina Department of Revenue’s "file and pay" page. Simply search for the type of tax you need to pay, then fill out the information on the screen. You'll need to know the tax year and your Tax Account ID Number to pay.

Alternatively, if remit less than $20,000 in monthly withholding taxes, you can mail your tax returns to:

NC Department of Revenue
PO Box 2500
Raleigh, NC 27640

Rippling’s full-service payroll software

If you’re looking for the easiest stay on top of North Carolina’s tax requirements, Rippling’s payroll software can automatically calculate and file federal, state, and local taxes while managing compliance. 

FAQs about North Carolina payroll taxes

Are there local tax laws in North Carolina?

No. While North Carolina has a state income tax levied at a flat rate and State Unemployment Insurance (SUI), it has no local tax laws. 

Can your tax returns be audited in North Carolina?

Yes. North Carolina’s Employment Security office has the authority to audit tax records to ensure compliance with state laws. It may happen if a former employee filed a faulty North Carolina unemployment claim or if an employer files a quarterly tax report incorrectly. Audits can cover one calendar year to up to five years. The auditor can check whether taxable wages were correctly calculated. 

How do you know how much tax to withhold from employee salaries?

Employers get the information needed to calculate withholding tax obligations using an NC Employee’s Withholding Allowance Certificate (Form NC-4), which is signed and submitted by each employee. You can cross-reference that information with tax tables in the NCDOR’s tax withholding booklet to figure out what you owe. 

Alternatively, you can have Rippling calculate withholding taxes for you.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for, tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.