North Carolina Withholding Tax Payment Plan Options
Checklist
Introduction
Withholding tax refers to state income tax withheld from employee paychecks and remitted to the North Carolina Department of Revenue. When a business cannot pay withholding taxes in full by the due date, the state may offer payment plan options to resolve the debt over time.
Understanding available payment options and tax resolution strategies helps businesses stay compliant while managing cash flow challenges.
What This Issue Means
A withholding tax payment plan is a formal arrangement between your business and the North
Carolina Department of Revenue to pay past due state tax in installments rather than in one lump sum. The state offers installment payment agreements when a business acknowledges a tax debt and demonstrates an inability to pay the full amount immediately. This arrangement allows the state to collect taxes over a scheduled period while the business continues operating.
Why the State Offers This
The North Carolina Department of Revenue uses payment plans as an administrative tool to encourage voluntary compliance and collect taxes that might otherwise remain unpaid.
Businesses facing legitimate cash flow challenges can request plans after receiving a Notice of
Collection, but before forced collection actions become necessary. Payment plans also reduce the state’s administrative burden compared to pursuing more aggressive collection methods such as tax liens or wage garnishments.
What Happens If This Is Ignored
If a business does not address past-due withholding taxes or respond to collection notices, the state may pursue forced collection actions, including placing a Certificate of Tax Liability on business assets, levying bank accounts, or garnishing wages. The longer withholding taxes remain unpaid, the greater the likelihood of escalated collection activity. A business that ignores initial notices may not be offered a payment plan option later and may face a Collection
Assistance Fee.
What This Does Not Mean
A payment plan request does not guarantee approval, and the state retains the right to deny requests. Being offered a payment plan does not erase penalties or interest owed on the unpaid taxes. Interest continues to accrue on any unpaid tax liability even during an installment payment agreement. A payment plan also does not suspend or reduce the underlying tax debt itself.
Payment Options Available
The North Carolina Department of Revenue offers several tax payment options depending on your financial situation. Standard installment agreements are available for debts that can be paid within 18 monthly installments. Exception requests may be considered for multi-period audit assessments or if you can demonstrate financial inability to meet standard requirements using the RO-1062 Collection Information Statement. Businesses may also explore Offer in
Compromise or Currently Not Collectible status in certain circumstances by contacting the
Department at 1-877-252-3052.
Step-by-Step Checklist
Step 1: Confirm You Received a Notice of Collection
The North Carolina Department of Revenue cannot set up an installment payment agreement until you receive a Notice of Collection. This notice indicates your tax liability is final and collectible, making you eligible to request a payment plan.
Step 2: Gather Your Tax Account Information
Locate the most recent tax notice or payment statement from the North Carolina Department of
Revenue. Identify your tax identification number or Social Security number, the specific tax periods involved, and the total amount owed, including principal, penalties, and interest.
Step 3: Calculate Your Monthly Payment Capacity
Review your business’s monthly cash flow and available funds to determine what amount you can realistically pay monthly toward the tax debt. Document your business’s revenue, expenses, and outstanding obligations for the past three to six months.
Step 4: Submit Form RO-1033 Electronically
Complete and submit the Installment Agreement Request electronically via Form RO-1033 through the state’s online payment portal on the North Carolina Department of Revenue website. Include your business name, tax identification number, tax periods involved, total amount owed, and proposed monthly payment amount.
Step 5: Respond to Follow-Up Communication Promptly
If the state requests additional information, provide it within the timeframe specified in their communication. For exception requests requiring financial documentation, complete the
RO-1062 Collection Information Statement for Individuals and provide your last three months of bank statements from your bank or financial institution.
Step 6: Review Your Payment Agreement Terms
Once approved, obtain a written agreement outlining the payment schedule, due dates, and monthly amounts. Verify that the contract specifies what happens if you miss a payment and confirm whether a Certificate of Tax Liability may be issued.
Step 7: Set Up Automatic Bank Draft Payments
The North Carolina Department of Revenue requires installment payments to be drafted from your bank account unless you do not have a bank or financial institution account. Provide your banking information and authorize automatic monthly drafts to ensure payments are made on time and avoid a returned check penalty.
Step 8: Make Payments on Schedule
Submit each payment by the due date specified in your agreement using the authorized bank draft method. Keep records of each payment made, including confirmation numbers or bank statements showing the draft transactions from your account balance.
Step 9: File and Pay All Current Tax Returns
During the entire term of your installment payment agreement, you must continue to file and pay all current tax returns in full, including Form NC-5 for withholding tax returns. Failure to remain current on new tax obligations, including unemployment insurance tax and estimated taxes, will result in default of your payment plan.
- Missing payment deadlines: Once a payment plan is in place, missing even one
- Failing to respond to state requests: The state may request financial documents, tax
- Failing to keep current on new tax obligations: Filing and paying current tax returns
- Incomplete payment plan applications: Submitting requests without required
- Assuming the payment plan stops interest: Interest continues to accrue on any
- State tax notice review and response
- Penalty and interest reduction options
- Payroll and trust fund tax assistance
- Payment plan and relief eligibility review
- Representation with state tax agencies
Step 10: Monitor for State Notices
Watch for any notices from the state regarding your payment plan status or changes to your agreement. Contact the Department of Revenue immediately at 1-877-252-3052 if you may miss a payment or need payment assistance.
Common Mistakes to Avoid scheduled payment can result in cancellation of the plan and renewed enforcement action. The Department must take legal action to require immediate collection without notice if you default on any terms of the agreement under NC Statutes. returns, or updated account information during the payment plan period. Ignoring these
requests often leads to plan denial or cancellation and may result in forced collection actions such as bank levies. in full during the installment agreement period violates the agreement terms. You must remain current on all new withholding tax obligations, unemployment insurance, and other commonly filed taxes while paying off the past due balance. documentation or with incorrect business information can delay processing and may result in denial. Double-check all information before submitting Form RO-1033 to avoid processing issues and potential Collection Assistance Fee assessment. unpaid tax liability even while you are making installment payments. The total amount you ultimately pay will be higher than the original debt due to ongoing interest charges throughout the tax year.
Frequently Asked Questions
Can I Pay My Tax Debt With a Credit Card?
The North Carolina Department of Revenue accepts credit or debit card payments for tax obligations, though a convenience fee may apply for credit card payments. However, this payment method does not automatically establish an installment agreement and should not be used to replace submitting Form RO-1033 for formal payment plan approval.
What Is the Collection Assistance Fee?
The Collection Assistance Fee is a 20 percent penalty assessed on defaulted installment payment agreements under NC Statutes. The Department will not evaluate this fee during the term of an active contract; however, if you default on any terms, this fee will be added to your outstanding balance.
Do I Need Professional Help With My Payment Plan?
While you can submit Form RO-1033 directly, consulting with an Enrolled Agent or tax professional may be beneficial for complex situations. Professional assistance can be particularly helpful if you need to complete the RO-1062 Collection Information Statement or request an exception to standard payment plan requirements.
Received a State Tax Notice?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
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