North Carolina's Tax Code Brings Surprises This Tax Season

Apr 15, 2015

Credit www.irs.com

If you haven’t filed your North Carolina taxes yet, you may be in for a few surprises.  The state's tax code underwent major changes in 2013, but many 2014 tax filers are just noticing.

For example, some taxpayers forgot North Carolina did away with its Earned Income Tax Credit.

Cara Williams is the Finance Director for Reinvestment Partners in Durham which runs a free tax service for low to moderate income families.

“There were a number of people who owed for the first time in NC.  They didn’t understand the impact of the tax changes on them until tax time this year," said Williams.

About one million working families across North Carolina qualified for the Earned Income Tax Credit.

Williams says a good number of the 1,000 people they served "either owed a dollar or were getting back a dollar," said Williams.  She said they did their taxes just how the state wanted them to do them.

“But then there were a number of people, retirees, who are accustomed to having a certain amount of their income exempted at $2,000 for regular retirees and $4,000 for government retirees.  That income was not exempted from tax this year, so a number of them had tax bills they had to pay," said Williams.

Other tax credits eliminated by the state include credits for child care expenses and donations of real estate for conservation purposes. 

Governor Pat McCrory and the legislature applauds the tax reform package which included a "flat tax."  North Carolina taxpayers saw their state taxes drop to 5.8% this year from a high of 6, 7 or 7.75%, depending on how much you make.

Alexandra Sirota is Director of the Budget and Tax Center, based in Raleigh.  She says those tax changes passed by the state in 2013 actually means a majority of taxpayers will pay more than they did the year before.

“And then at tax time, we know that many folks are experiencing the loss of the deductions and credits that went away and seeing that that is having a hit on their family’s budget.  And so there will be many surprised taxpayers," said Sirota.

Sirota says in the end, the current tax structure has millionaires in the state paying a smaller percentage of their earnings in taxes than the middle class and that means there won't be enough revenue coming in to pay for growing schools, courts and infrastructure.