North Carolina State Taxes

North Carolina's Department of Revenue was created by the General Assembly in 1921, making it one of the first in the country. The North Carolina Department of Revenue’s mission is to administer the tax laws and collect the taxes due the state in an impartial, uniform, and efficient manner.

Below you will find information unique to the North Carolina Department of Revenue

• Tax Warrant
• Certificate of Tax Liability
• Bank Levy
• Wage Garnishment
• Notice of Collection
• Payment Options
• Offer in Compromise
• Penalties and Interest
• Power of Attorney
• Disputing a Liability

Tax Warrants in North Carolina

A tax warrant is a request to levy on and sell any personal property owned by a taxpayer who has failed to pay tax, penalty, interest and fees that have been assessed by the NC Department of Revenue. The warrant is issued to the Sheriff of the county in which the taxpayer’s property or business is located in or to any Revenue Officer or other employee of the Department of Revenue charged with collection of taxes.

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Certificate of Tax Liability in North Carolina

A CTL places a judgment on any real or personal property that is held by a taxpayer and it makes the liability public information. In order to get a clear title to the property, the CTL must be satisfied or resolved.

If the CTL has been satisfied and released in the Clerk of Courts’ office, you will need to contact the various credit reporting agencies to have it removed from your credit report. This is not something that the NC Department of Revenue can have removed for you.

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Collection Actions in North Carolina

If you have a past due balance, the Department of Revenue may do any of the following:

• Attach and garnish your bank account to pay taxes due.
• Attach and garnish 100% of any payments received as a result of the contract as well as any commissions.
• Attach and garnish the wages owed to you by an employer. Wage attachments and garnishments are 10% of a taxpayer’s gross income until the tax liability has been settled. Non-wage, contract and bank attachments and garnishments are issued at 100% of the liability due until the tax liability has been settled.

Attachment and garnishment payments withheld should be remitted to the Department of Revenue every 30 days until the liability shown due on the attachment and garnishment together with accrued interest is paid in full.

Collection Error by the State of North Carolina

If the Department issues an attachment and garnishment in error, it will be released as soon as the error has been verified. The Department mails attachment and garnishment release notices but it will also fax them when requested.

Notice of Collection from North Carolina

If you have received a Notice of Collection, then an assessment against you has become final and collectible. Your account has been assigned for collection. If the liability is not paid, the North Carolina Department of Revenue may pursue one or more of the following collection options:

1. Attach and Garnish your wages, salary or bank deposits.
2. Issue a Tax Warrant directing the sheriff or a designated employee of the Department of Revenue to levy upon and sell your property.
3. File a Certificate of Tax Liability (i.e., a lien on your property).
4. Where criminal tax proceedings are initiated, request payment of taxes as a condition of any plea arrangement or as restitution upon any conviction.

If the Department of Revenue pursues the collection options set out above, the following options or remedies are available to you:

1. You can end the attachment and garnishment of your wages, salary, and bank deposits and the seizure of your property by making full payment of the assessed liability.
2. You can secure the release of a Certificate of Tax Liability by making full payment of the assessed liability.
3. You can seek the release of a Certificate of Tax Liability (CTL) if one of the following conditions are met:
• The judgment was filed in error.
• The liability has become unenforceable due to the lapse of time.
• The CTL is creating an economic hardship for you.
• The fair market value of the property exceeds the tax liability and release of the CTL on part of the property would not hinder collection of the liability.
• Releasing the CTL would increase the State’s chances for collecting the tax.
4. You can seek to enter into an installment payment agreement.
5. In the event criminal tax proceedings are initiated, you should contact your attorney and the prosecutor to determine your options.

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Payment Options with the State of North Carolina

You may pay your tax by using a credit/debit card (Visa/Mastercard) or bank. You may also pay your tax with a personal check, money order or cashier’s check. 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 N.C. Department of Revenue and mail payments to P.O. Box 25000 – Raleigh, NC 27640-0002. Include with the payment your name, social security number, the kind of tax, and the tax year the payment is for. When paying in person at your Collection Division Office, cash will be accepted.

If you cannot pay your taxes by the due date, you should still file your return on time. Any unpaid tax is subject to penalty and interest, which accrues daily; therefore, you should pay your balance in full as soon as possible. It is important that you pay as much as you can with the return to minimize the penalty and interest.

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Offer-In-Compromise with the State of North Carolina

The Secretary of Revenue with the approval of the Attorney General to accept full settlement of a liability for a lesser amount than is due when in their opinion it is in the best interest of the state. You may be a candidate for offer-in-compromise if you meet 1 of the 4 conditions listed below:

1. There is a reasonable doubt as to the amount of the liability of the taxpayer under the law and facts.
2. The taxpayer is insolvent and the Secretary probably could not otherwise collect an amount equal to or in excess of the amount offered in compromise.
3. Collection of a greater amount than that offered in compromise is improbable and the funds or a substantial portion of the funds offered in the settlement come from sources from which the Secretary could not otherwise collect.
4. A federal tax assessment arising out of the same facts has been compromised with the federal government on the same or a similar basis as that proposed to the State and the Secretary could probably not collect an amount equal to or in excess of that offered in compromise.

Upon acceptance of the offer, the Department requires payment of the settlement amount in full. The Department will not accept a "zero dollar" offer.

Concurrent Offer in Compromise with the IRS

The Department evaluates your offer separately from your IRS offer.

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Penalties and Interest in North Carolina

On or before June 1 and December 1 of each year, the Secretary of Revenue establishes the interest rate to be in effect during the six-month period beginning on the next succeeding July 1 and January 1, respectively. The rate applies to refunds and assessments.

7% Interest Rate for January 1, 2008 through June 30, 2008

Interest rates for periods before January 1, 2008 are as follows:

Rate	Period
8%	January 1, 2007 through December 31, 2007
7%	January 1, 2006 through December 31, 2006
5%	July 1, 2003 through December 31, 2005
6%	January 1, 2002 through June 30, 2003
8%	January 1, 1999 through December 31, 2001

If you do not pay the total amount of taxes you owe, the Revenue Department charges interest on any unpaid tax. Interest is computed at the applicable rate from the original due date to the date of payment.

If you do not file by the original due date, a late filing penalty of 5% of the unpaid tax is added for each month your tax return is late. This penalty cannot exceed 25% of your unpaid tax.

The penalty for the late payment is 10% of the tax shown due and not paid by the original due date. However, if you have an extension and pay at least 90% of your tax by the original due date, the late payment penalty will not apply if you pay the remaining balance due with the return by the extended due date.

Interest on the underpayment of estimated income tax is computed on Form D-422. If your income tax liability after credits and North Carolina tax withheld was $1,000.00 or more, you are required to pay estimated tax.

If the IRS changes your federal return, you must amend your State return within 6 months after the date the federal report is received. If you fail to report the federal change, you must pay a 5% penalty for each month the federal change is not reported to the Revenue Department. The penalty cannot exceed 25% of your additional tax.

If you understate your income, overstate your deductions, or make erroneous adjustments to your federal taxable income you will be subject to a negligence penalty of 10% or 25%. If the IRS changes your federal income tax return and assesses the negligence or accuracy penalty, you will be subject to a negligence penalty for North Carolina tax purposes.

If you fail to pay an overdue tax debt, the Revenue Department can assess a 20% Collection Assistance Fee on any tax, penalty and interest not paid within 90 days after the tax debt becomes collectible. The fee will not apply if you are making payments under an installment agreement that became effective within 90 days after the debt became collectible.

If you write a bad check to the Revenue Department, you will be charged a bad check penalty of 10% of the check amount that was returned for insufficient funds. The bad check penalty cannot exceed $1,000.

If it is discovered that there is fraud with intent to evade or defeat the tax, you will be assessed a fraud penalty of 50% of your unpaid tax.

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Power of Attorney with the State of North Carolina

It is the Department of Revenue's policy to accept a paid preparer's signature on a return as authorization to discuss certain matters relating to that return, such as assessment and adjustment notices, information contained or missing on the return, and information about a refund or payment. This authority is extended only to an individual paid preparer, not to a company, and does not include discussing audit activity or requests for review of proposed assessments or proposed denials of refunds. Those matters require form GEN-58, "Power of Attorney and Declaration of Representative", to be filed with the state. With respect to federal tax information provided to the Department pursuant to our exchange agreement with the Internal Revenue Service, we are prohibited from discussing such information with a representative without the taxpayer's express written authority to do so.

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Resolving Disputes About Your Taxes in North Carolina

Taxpayers who disagree with proposed assessments of taxes from the Department of Revenue or refunds denied by the Department have the right to challenge the Department’s action.

• Step 1 – If you disagree with a proposed assessment of taxes or a denied refund, you may request that the Department review that action by submitting Form NC-242, Objection and Request for Departmental Review to the Department. The request for review must be received by the Department within 45 days from the date the notice was mailed by the Department (if mailed) or delivered to you (if delivered by a Department employee in person). An assessment for taxes shown due on a return but not paid or the application of refunds to debts owed to State and local government agencies or the IRS is not subject to the review process.
• Step 2 – If your request is timely made, the Department must review the case. The Department will then 1) grant the refund or remove the assessment, 2) request additional information from you to help make the decision, or 3) schedule a conference with you to discuss the case. If a conference is scheduled, then the Department will notify you about the time and date of the conference at least 30 days in advance. It may be shorter than 30 days if both you and the Department can agree on a mutually agreed time and date. The conference can be in person or by telephone. This conference is not a formal proceeding in that there is no sworn testimony or rules of evidence that apply in court cases. You can, however, designate someone to represent you. Most disagreements are resolved at this step.
• Step 3 – If you and the Department cannot agree at Step 2, then the Department will send you a notice of final determination. This notice is a written document that explains why the Department determined that the proposed assessment or denied refund should be sustained and informs you about how you can challenge this determination. This notice must be provided to you within nine months of the date you asked for the review in Step 1, unless you and the Department agree to extend the time limit.
• Step 4 - You can challenge the Department’s final determination by filing a petition for a contested tax case hearing with the Office of Administrative Hearings (OAH). The OAH has impartial administrative law judges that hear cases that individual citizens and businesses file against government agencies. You have 60 days to file this petition after the Department sends or delivers the notice of final determination to you. You must also send a copy of the petition to the Department at this address:
  
  General Counsel
  Department of Revenue
  P.O. Box 871
  Raleigh, NC 27602-0871
• Step 5 –If you disagree with the final decision from Step 4, you may file a petition in the Superior Court of Wake County for further judicial review of the case. Generally, you must file the petition within 30 days of when you receive the final decision from Step 4. But if the OAH dismissed the contested tax case due to lack of jurisdiction because the only issue in the case is the constitutionality of a statute, then you have two years to file this petition. You must pay the tax, penalty, and interest due before the petition will be considered.

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If you have unanswered questions, do not hesitate to contact Larson Financial.