Ready to file your NC state taxes? With delays expected, you’ll need to be patient
The good news: North Carolinians are going to pay less state taxes this year, and the economic forecast remains sunny.
The not-so-good news: If you are an early bird state tax filer, you are going to need be patient. State taxes in North Carolina aren’t ready to be processed yet, but should get rolling by mid-February.
Here’s what you need to know about tax season in North Carolina.
Why is tax processing delayed?
Tax cuts were included in the 2021 state budget. The lowered individual income tax rate — from 5.25% to 4.99% — started with the new year, so taxpayers should already be seeing that reflected in their paycheck withholdings.
That tax cut was part of the Republican-written state budget that Democratic Gov. Roy Cooper signed into law just before Thanksgiving. The budget compromise ended a years-long stalemate in how to allocate the Old North State’s billions of taxpayer money.
Because the budget was late — nearly five months after it should have taken effect — and included other tax changes that impact this year’s filings, the state isn’t quite ready to process your income taxes.
In January, the Department of Revenue announced that it would not be able to process taxes until mid-February because of the delayed budget.
That situation hasn’t changed, said Dia Harris, a Department of Revenue spokesperson, in an email to The News & Observer on Thursday.
“Accurately processing taxpayer 2021 returns and issuing refunds in an efficient manner is a priority for NCDOR,” Harris said.
“Although returns will be processed later this year due to the delayed budget approval, we are continuously working to test system updates and approve updates in commercial taxpayer preparation software,” Harris said.
That mid-February date may change based on the agency’s continuing work to test and approve system updates in the software.
Jason Poole is a certified public accountant with TRP Sumner PLLC, which has offices in Dunn and Fayetteville.
Poole said they’ll do about 3,000 returns for businesses and individuals this year. He said their tax returns are stacking up because forms aren’t ready and can’t be processed in the software systems yet.
He said the software forms aren’t eligible to be processed yet because they still have to be approved by the Department of Revenue before they can be submitted. Different software vendors are working through it.
Poole said CPA firms use three to four big software players. The Revenue department usually starts the process in August, assuming budget changes go into effect at the start of the fiscal year, which is July 1.
With this year’s budget not becoming law until November, the entire timeline shifted. While some time compression for tax filings occurs every year, Poole said this “just really makes that time constraint more difficult.” Plus, those firms with workers out because of COVID-19 means staff shortages can contribute to the delays.
What should taxpayers do?
So should taxpayers wait to start working on their taxes, then?
“We tell ours to go ahead and start bringing the stuff in,” Poole said, so they can be ready to submit. “If everybody waits, that really puts us behind.”
His advice: “I think they just need to be patient.”
Once the Department of Revenue starts accepting tax filings, there will be a delay in sending out refunds, too.
Poole said legislators might not realize the amount of work it takes for Revenue and software vendors to get up and running, and that the delayed budget meant a tax processing delay, too.
“Anything they can do to get that [budget] done quicker, earlier obviously is a big help,” he said.
Future taxes
The state budget also starts phasing out the corporate income tax and continues to lower the individual income tax rate over several years, down to 3.99% in 2027. The child tax deduction amount also increased, and the military pension tax was eliminated.
When the Senate tax proposal rolled out mid-2021, Senate Finance Chair Paul Newton, a Cabarrus County Republican, said that “we believe people spend their money better than government does.”
Newton said Friday in an emailed statement to The News & Observer that results of the Republican-majority legislature’s “low-tax philosophy” speak for themselves.
“People are keeping more of their money, and the state has had surpluses in six of the last seven years. Good things happen when the legislature stays disciplined, says ‘no’ to unreasonable spending requests, and sends money back to the people who actually earned it.”
When Cooper announced he would sign the budget bill, he cited tax relief for “everyday North Carolinians” as one of the reasons he approved it.
For those taxpaying procrastinators, you don’t need to fret yet. Tax Day is April 18 this year, so you still have plenty of time left.
This story was originally published February 4, 2022 at 4:45 PM.
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