North Carolina help, please

[Catherine]

Hi everyone --

Clients moved to NC in late October, so I have a part-year resident return to do for them. What I can't find in my reference book is if NC taxes on NC-only earning, or whole-year proportionally by length of residence (as MA does).

Also, are there any NC oddities that I should be aware of? Like the MA health-care mandate, or Use Tax (reporting or safe harbor numbers), or special treatment of in-state bank interest?

Thanks,

Catherine

[Gail in Virginia]

Offhand, I can't answer about the NC part-year. The "oddities" I can think of offhand for them, however, are on pension income, self-employment income, severance pay, and charitable contributions. Almost all pension/IRA accounts get a $2000 exclusion.for pirvate pensions, or $4000 for government pensions. Up to $35000 of severance wages received as a result of permanent involuntary termination through no fault of your own is excludable from NC income. Net Business Income that is not considered passive can be excluded up to $50,000. Depending on income, charitable contributions are sometimes (rarely) deductible without itemizing.

If you took the tuition and fees deduction on the federal, that has to be added back for the state. No exclusion from income for discharge of qualified principal residence indebtedness, or IRA used for charitable contribution, nor can you deduct tuition and fees or DPAD on NC.

And they do not recognize same-sex marriages.

I hope someone from NC will also post - we do a few NR NC returns, and a few resident NC returns since we are near the border. But I am not an expert!

[Catherine]

Thanks, Gail -- that was a help! No tuition, but there are private pensions for both of them (retired couple), and some charity as well.

I'd best get used to NC, as my older girl plans to move there late this summer.

Catherine

[JohnH]

Good summary Gail.

NC will exempt the first $2,000 of pension income for each spouse. That figure goes to $4,000 if they are government retirees, and SOME government retirees can exclude their entire pension. (You'll have to read up on the Bailey case if it applies, but if their income is from private pensions or IRA plans, don't bother).

NC allocates based on income, not time of residence. Just follow the instructions for allocating NC and non-NC income for a part-year resident. (You might need to allocate the pensions based on where they were living when the payments were made, though).

Next year everything changes - and I do mean EVERYTHING. So don't expect 2014 to work like 2013. I'd try to explain, but as they say - it's complicated.

[jlewis]

Catherine-

If using ATX, NC D-400 form, click on data tab & near bottom is area "Residence Status" to choose

either full, part-time or non-resident. After that click on form tab 2 (second page of D-400) & go to where

you see lines 53, 54, & 55. Clicking on either 53 or 54 will bunny hop to the allocation worksheet where

fed AGI is brought into col A, you enter into col B NC amounts.

The NC DOR website is pretty helpful, choose the Tax Professional button then under "Individual Income"

click on Filing Requirements where one of the choices is Non-Res/PY topics. A little further down this page

is "Adjustments to Fed AGI" that if your client has any of the topics mentioned you may want to click on the

item.

Hope this has been useful

http://www.dor.state.nc.us/

[Catherine]

Lots of help; thanks to all! Now all I have to do is parse out what they earned by when -- including half a gazillion trades of stocks and funds. Fortunately, I have a Gruntworx spreadsheet of those and can sort by date.

Catherine

[JohnH]

I'd do a simple spreadsheet for the pension income, and allocate monthly payments based on which state they were in on the payment date of the pensions. I've done this before with NC - didn't even send them my work. I just entered it in the PY adjustments worksheet (I think ATX has one), which also doesn't get attached to the return. The trades, as you said, get assigned to the state they were living in on the date the trade was made. Sounds like an interesting mathematics exercise.

[Catherine]

'Tis on the list for this evening.

Thanks again, everyone! This group is just terrific.

[jlewis]

One other thing worth mentioning If client has foreign tax paid, NC allows tax credit for taxes paid "to more than one state or country". Basically same info that would be on fed form 1116. Hope pdf below that refers to NC Gen Statutes

17 NCAC 06B.0607 works.

NC Tx Credit.pdf

[Catherine]

Thanks again!