North Carolina Unemployment Tax Registration

How To Do Payroll In North Carolina: Detailed Guide For Employers

REVIEWED BY:Charlette Beasley

Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.

Heather is a staff writer and payroll specialist with several years of experience working directly with small business owners. Her expertise allows her to deliver the best answers to your questions about payroll.

This article is part of a larger series on How to Do Payroll.

Payroll in North Carolina is pretty straightforward and follows general federal guidelines, requiring you to secure a Federal Employee Identification Number, NC Withholding Identification Number, and register for unemployment tax. However, there are still several labor law regulations that must be considered for state payroll compliance. Use our guide below to ensure you take the proper steps to correctly do payroll in North Carolina.

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State Income Taxes

North Carolina has a flat income tax rate of 5.25%. This means that regardless of an employees taxable income or filing status, the rate is the same for all. North Carolina requires employers to withhold state income tax from employees wages and remit the amounts withheld to the Department of Revenue. Any employer that does business or has an employee in North Carolina, whether the employer is a state resident or not, must withhold state tax.

Local Taxes

There are no local or city taxes in North Carolina, making it one of the easier states in which to file payroll taxes.

Add To Existing Company Setup

Submit a request to your service team to add NC and/or NCSUI to your company setup. Please include the below with your request:

North Carolina Department of Revenue

• Withholding Withholding account number and Deposit Frequency. If youre unsure of your deposit frequency or account number you can call the agency at 877-252-3052.

North Carolina Department of Commerce, Division of Employment Security

• Unemployment Account Number and Tax rate. This can be found on a Tax Rate Notice or the Quarterly contribution report. If youre unsure of your tax rate or account number, you can call the agency at 919-707-1170.

Power of Attorney POA is required, please obtain the prefilled form from your client service representative.

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Employer Requirements And Information

State Withholding Taxes Unemployment Insurance Tax Workers Compensation First Benefits Insurance CompanyNew Hire Reporting Guide Occupational Safety and Health Act of North Carolina Federal Occupational Safety and Health Act Employment Eligibility Verification

Can The Tax Rate Be Protested

All employers must maintain records for each person they employ . These records must show:

Records must be maintained for at least five years and be available for inspection by authorized personnel of DES.

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Gathering The Necessary Documents

Employers in North Carolina cant pay wages to newly hired employees unless they provide the documents that enable the employer to calculate the federal and state tax withholdings.

These documents are usually submitted before the employment period starts or within the first few days of employment. Employers must report a newly hired employee to the NC New Hire Directory within 20 days after the employment period begins.

Lets take a look at the documents employers in North Carolina have to acquire from their employees.

Final Paycheck Laws In North Carolina

North Carolina law states that an employee must receive their final paycheck on or before the next available payday following their termination, whether they quit or were terminated by the company. The final paycheck must include payment for all hours worked, commissions due, and any accrued but unused paid time off. Additionally, final paychecks cant be held until the return of company equipment.

If youre not using a payroll service and need to pay an employee quickly, use our guide to for help.

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North Carolina Payroll Taxes

Every North Carolina employer is responsible for paying payroll taxes, as well as Social Security, Medicare, and unemployment taxes for every employee. Social Security and Medicare taxes are paid under the Federal Insurance Contributions Act . The employer pays half of FICA, and the other half is paid from the employees wages, resulting in each party paying 6.2% for Social Security and 1.45% for Medicare.

Employers must also pay State Unemployment Taxes and Federal Unemployment Taxes based on a percentage of each employees salary. The North Carolina new employer SUTA rate is 1%. After 12 months of paying into the system, you will receive a new SUTA rate each year. FUTA is taxed at 6% on the first $7,000 earned.

Keep in mind that the following services are exempt from withholding laws:

• Agricultural labor, except where subject to federal withholding
• Domestic service in a private home
• Services performed by military spouses that are federally exempt, under the Veterans Benefits and Transition Act of 2018

Paying Employees In Other States

If you operate in multiple states or just have employees working from home across a state line, it’s important to file the correct state forms for those workers. See what forms we file in the states where you pay employees.

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Nothing in this article and/or information is intended or should be construed, as legal, tax or investment advice, or a legal opinion.

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Employer Tax Account Number

If you do not have an Employer Tax Account Number , you can apply for one here. After you apply, you will receive two pieces of mail: one with your seven-digit EAN, and one with your six-digit PIN. This may take four to six weeks.

You can then use the seven-digit EAN and six-digit PIN to create an online account at des.nc.gov to manage your unemployment tax information and respond to unemployment claims.

If you have an EAN, but do not remember your username and/or password, do not apply for another EAN. Sign in by entering your username and selecting I forgot my password/reset password. If you do not remember your username, select I forgot my username. An email will be sent to the email of record. Email for additional username and password assistance.

Calculating The Payroll Tax

The process of deducting taxes is slightly different for each employee as their marital statuses or additional sources of income arent the same. The IRS and North Carolina Department of Revenue provide detailed guidelines that enable employers to calculate the state and federal payroll taxes.

It is worth adding that both of these tax authorities adjust payroll tax rates annually, so employers must check the rates at which they calculate payroll taxes before the start of every fiscal year. Heres how you can calculate the payroll tax for your employees

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Federal And State Tax Accounts

Federal Tax Accounts:

• If you dont already have an Employer Identification Number , you can easily apply for an EIN with the IRS online. There is no cost to apply for an EIN.
• To read more about applying for an EIN, read our help article, Your Step-by-step Guide on How to Apply for EIN.

• Although it is not required, we suggest you register for the EFTPS .
• EFTPS is an easy way to pay your federal taxes online or view any tax filings made on your behalf by Patriot. To find out more about the EFTPS, please read our article, What Is EFTPS?

State of North Carolina Tax Accounts:

• You can register your business online with the North Carolina Department of Revenue to obtain your tax ID number for state income tax withholding .
• You may also want to register for the electronic services for businesses with Department of Revenue. You will be able to file and pay SIT taxes, or view any transactions Patriot made on your behalf.

• The North Carolina new employer SUTA rate is 1% for 2022. You will need to know this when you are setting up your payroll tax settings.
• To learn more about SUTA please read our article, What Is SUTA Tax?

North Carolina Overtime Regulations

There are no labor laws in North Carolina that limit the number of hours an employee 18 years or older can work. However, nonexempt employees are required to receive time and a half overtime pay if their working hours reach beyond 40 hours per workweek. Exempt employees are not subject to overtime pay.

Private employers are not permitted to give comp time to nonexempt salaried employees in place of time and half. Simply being paid a salary does not exempt an employee from receiving overtime pay.

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Registering A Business In North Carolina

Back in 2015, more than 1.6 million or almost 15% of the states residents were employed by small businesses.

The number of registered businesses in North Carolina has increased in the meantime, which means that organizations with fewer than 500 employees constitute a significant portion of the states economy.

New businesses have to be registered with the North Carolina Secretary of State office unless youre registering a sole proprietorship or a general partnership, in which case you will have to submit the required documents to the Register of Deeds office in the county where the business will be operating.

The exact steps you need to take during the registration process depending on the business structure you choose. The State of North Carolina requires you to have the necessary licenses and permits for specific business activities.

The Secretary of State Office issues more than 700 occupational and regulatory licenses and permits, so you have to find out which permits or licenses you have to acquire to start a business in a particular industry.

All new business owners can contact the Business Link North Carolina organization set up in partnership with the NCs Department of Commerce for a free consultation regarding the requirements they need to meet to get their business off the ground.

Register With The Division Of Employment Security

As a North Carolina employer subject to UI tax, your small business must establish a North Carolina UI tax account with the North Carolina Division of Employment Security . You set up your account by registering your business with the DES either online or on paper. Once registered, you’ll be issued a North Carolina unemployment insurance tax number. Both online and paper registrations use Form NCUI 604, Employer Status Report. To register online, go to the Form 604 online application webpage on the DES website. To register on paper, you can download Form 604 from the forms download page of the DES website. There is no fee to register your business with the DES.

Note: To establish your North Carolina UI tax account, you’ll need a federal employer identification number . You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.

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What Is An Overpayment

An overpayment occurs when you are paid unemployment insurance benefits you are not entitled to receive. A Notice of Overpayment is mailed when an overpayment is established, and it lists the reason for the overpayment, the section of law that covers the overpayment and the weeks overpaid.

Unemployment Insurance In North Carolina: Funding Benefits And Eligibility

Unemployment insurance is a term that refers to a joint federal and state program that provides temporary monetary benefits to eligible laid-off workers who are actively seeking new employment. Qualifying individuals receive unemployment compensation as a percentage of their lost wages in the form of weekly cash benefits while they search for new employment.

The federal government oversees the general administration of state unemployment insurance programs. The states control the specific features of their unemployment insurance programs, such as eligibility requirements and length of benefits.

Although the word insurance is in the term, a few key differences distinguish unemployment insurance from private insurance plans such as home insurance, car insurance, or health insurance. In most states, employersrather than individuals themselvespay unemployment taxes that fund state unemployment insurance programs. When an individual loses their employment , state-administered unemployment insurance programs provide temporary monetary benefits to the former employee. Unemployment insurance compensation is not intended to replace lost wages it is designed to replace a portion of the individual’s lost wages with the goal of providing financial support as an individual searches for a new job.

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Am I Eligible For Unemployment

Unemployment benefits provide temporary payments to eligible workers who lose their job through no fault of their own. These payments can help you with expenses while you look for employment. You must be able and available for work, and actively seeking work, to receive benefits. In North Carolina, the most you can currently be paid in state unemployment benefits is $350 a week for up to 12 weeks.

Understanding The North Carolina Payroll Tax

All businesses registered with North Carolinas Secretary of State or local Register of Deeds offices are required to file for federal and state payroll taxes.

North Carolina is one of ten states that has a flat rate state income tax, which means that you wont have to calculate the tax withholdings based on salary levels.

The state doesnt have local income taxes, but it requires all employers to cover the expenses of the state unemployment insurance that applies to the taxable base wage. Moreover, employers also have to cover FUTA taxes and withhold FICA and federal income taxes.

Both state and federal payroll taxes are adjusted annually, and employers must keep in touch with the latest changes in order to know how to calculate the amount they should withhold from salaries they pay to their employees.

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Accrued Paid Time Off

If there are no company policies in place, the employer is required to pay employees for accrued time off upon termination of employment .

Earned time off cannot be forfeited unless the employer has a written forfeiture clause in its company policies under N.C.G.S. 95-25.13. This means that if your company handbook or policies manual does not specifically state what happens with accrued paid time off, you are liable to pay it upon termination.

Find Your North Carolina Tax Id Numbers And Rates

North Carolina Department of Revenue Withholding Account Number

North Carolina Unemployment Tax Number

North Carolina Filing Frequency

This is based on your previous years annual payroll totals. If you are unsure of your filing frequency, confirm your filing schedule by calling the Department of Revenue: 877-252-3052

North Carolina Unemployment Insurance Tax Rate

You are responsible for ensuring Square Payroll has the correct tax rate on file for your business. If you need to update your rate, you can do so from the Tax Info tab in your online Square Dashboard.

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I Dont Have An Employer Tax Account Number

If you do not have an Employer Tax Account Number , you can apply for one here. After you apply, you will receive two pieces of mail: one with your seven-digit EAN, and one with your six-digit PIN. This may take four to six weeks.

You can then use the seven-digit EAN and six-digit PIN to create an online account at des.nc.gov to manage your unemployment tax information and respond to unemployment claims.

If you have an EAN, but do not remember your six-digit PIN, do not apply for another EAN. Email for PIN assistance.

Employers may email for PIN assistance.

Employers may email for account sign in assistance.