Each year, many taxpayers in the state of North Carolina discover they owe more in taxes than they can pay in a lump sum. Whether due to miscalculated estimated income taxes, unexpected income, or delays in filing tax returns, the outcome is often a growing tax liability that can quickly spiral into collection action if not addressed.
To help, the North Carolina Department of Revenue offers an installment agreement program that allows qualifying individuals and businesses to break their balance into monthly payments. However, unlike the IRS, taxpayers must receive an official notice before requesting an installment plan. With stricter timelines, shorter repayment terms, and the possibility of legal action or a tax warrant, it’s essential to act quickly.
This guide outlines everything you need to know about North Carolina's payment plans for 2025, including who qualifies, how to submit an installment agreement request, what documentation is required, and how to stay compliant throughout the term. Understanding your options is the first step toward resolution, whether you're financially unable to pay your entire balance or want to avoid escalating penalties.
Understanding the North Carolina Department of Revenue
The North Carolina Department of Revenue (NCDOR) is the state's primary tax collection and enforcement agency. Established in 1921, the department ensures that the tax laws of the State of North Carolina are followed and that individuals and businesses contribute fairly to funding public services. Whether you're managing unpaid taxes, arranging a short-term payment plan, or disputing a notice, the NCDOR is the authority responsible for administering your case.
Here's what taxpayers should understand about the agency's role and resources:
- Taxes the Department Oversees: The NCDOR administers various taxes, including income tax, sales and use tax, withholding tax, franchise tax, and excise taxes on alcohol, tobacco, and motor fuels. It also oversees taxes related to motor carriers, partnerships, and specific aspects of property tax administration. These revenues support critical state functions, including education, infrastructure, and emergency services.
- How to Contact NCDOR: The department offers multiple contact options. For questions about balances, notices, or collections, call the Individual Tax Assistance or Business Tax Assistance line at 1-877-252-3052. For questions about installment agreements, contact the Collections Division at 1-877-252-3252. A dedicated hotline for reporting fraud is also available at 1-800-232-4939.
- In-Person Office Locations: If you need direct support, the NCDOR operates service centers in cities across North Carolina, including Raleigh (main office), Charlotte, Greensboro, Durham, Fayetteville, Asheville, and Wilmington. These locations assist with payment arrangements, account reviews, and document submission.
- Online Services and Portals: Taxpayers can manage their accounts, make a scheduled payment, or submit an installment agreement request through the department's official website and eServices Portal. You can also send questions and upload additional information using the online contact form, which routes requests directly to the appropriate division.
Taxpayer Help and Guidance: While the department enforces compliance, it also provides resources for those seeking tax resolutions. The service includes education materials, access to multilingual support, and options tailored to low-income taxpayers or those seeking assistance from a licensed tax professional.
Payment Plans for Individual Taxpayers
If an individual taxpayer owes state income taxes and cannot pay the entire balance simultaneously, the North Carolina Department of Revenue offers a solution: the installment agreement. This plan allows qualified individuals to split their tax liability into manageable monthly payments, helping them avoid immediate collection action such as wage garnishment or a tax warrant.
However, North Carolina’s rules differ from federal IRS programs, particularly regarding how and when you can apply. Below is a breakdown of what to expect when applying for a payment plan as an individual.
Eligibility Requirements
To qualify for an individual installment agreement, you must meet the following conditions:
- Receive an official notice: You can only apply after receiving an official notice, such as a collection notice, final bill, or final determination. The NCDOR does not allow taxpayers to request an installment plan proactively.
- No active enforcement actions: Unless specific exceptions apply, your account must not be under enforced actions such as garnishment, bank levy, or lien.
- Compliant with tax filings: All past-due tax returns must be filed before an agreement is approved. If filings are missing, the department may delay or deny your request.
- No prior default: You must not have defaulted on a previous installment agreement for the same tax periods.
- Remain within statutory limits: The plan's term must fall within the legal collection period defined by North Carolina tax laws—typically within the statute of limitations on assessed liabilities.
Terms and Repayment Structure
North Carolina does not require a minimum debt amount to qualify, but your balance determines your maximum repayment term:
Maximum Term Lengths by Amount Owed
- If you owe less than $1,000
→ Maximum repayment term: 15 months - If you owe between $1,000 and $6,999
→ Maximum repayment term: 30 months - If you owe between $7,000 and $49,999
→ Maximum repayment term: 40 months - If you owe $50,000 or more
→ Maximum repayment term: 50 months
- No setup fee is charged
Unlike the IRS, North Carolina does not charge an application or processing fee for setting up a payment plan.
- Interest and penalties continue
Interest continues to accrue during the entire term of the agreement. The current interest rate is set by the state’s interest calculation, based on the federal underpayment rate plus 2%.
- No forgiveness on penalties
The department does not waive penalties automatically. A late payment penalty may still apply unless hardship waivers are granted separately.
Application Process
To apply, follow these steps:
- Wait for official notice
Do not apply until you’ve received your final bill or collection letter from the NCDOR.
- Submit the Installment Agreement Request
Complete Form RO-1033 to begin the process. This form requires your financial information, account number, tax year, proposed payment amount, and banking details.
- Receive department response
The department will approve, deny, or request additional information. Be ready to respond promptly.
- Submit financial disclosure if requested
If your proposed payment is too low or you’re requesting special terms, complete Form RO-1062, the collection information statement for individuals, along with three months of bank account statements and supporting documents.
Required Documentation
Your paperwork depends on the complexity of your case.
- Standard documentation includes:
- Form RO-1033
- Notice of Collection or final bill
- Bank account or savings account info for automatic draft
- If requesting exceptions or hardship:
- Form RO-1062
- Last three months of bank statements
- Proof of hardship (e.g., loan denials, medical bills)
- Documentation of financial institution activity and household expenses
Payment Plans for Businesses
Businesses that owe the State of North Carolina unpaid corporate, withholding, or sales taxes may qualify for an installment agreement through the Department of Revenue. While the program offers similar relief as it does for individuals, business plans come with tighter restrictions—particularly around the repayment term and documentation requirements. If a business is financially unable to pay its entire balance upfront, a payment plan may help avoid aggressive collection action like garnishments or liens.
Here’s what business owners and responsible parties need to know about eligibility, terms, and the application process.
Eligible Business Types
Businesses of all types may qualify, provided they meet basic compliance standards:
- Sole proprietorships and partnerships
These include self-employed individuals and pass-through entities like general or limited partnerships.
- Corporations and LLCs
Both C-corporations and S-corporations, along with single- or multi-member LLCs, are eligible to apply.
- Nonprofit organizations
Tax-exempt nonprofits can enter into agreements if they owe income tax, withholding tax, or sales tax from taxable activities.
- Responsible persons
Owners, partners, and officers may be held personally liable for trust taxes if the business defaults, especially on withholding tax or sales tax.
Covered Business Tax Types
Most taxes administered by the NCDOR are eligible for payment plan arrangements. These may be combined under a single agreement to simplify repayment.
Business Taxes Eligible for Payment Plans
The following business tax types are eligible for installment or payment plan options:
- ✅ Sales and Use Tax
- ✅ Withholding Tax
- ✅ Corporate Income Tax
- ✅ Franchise Tax
- ✅ Alcohol, Tobacco, and Fuel Taxes
- ✅ Motor Carrier Taxes
Special Rules for Businesses
Business agreements come with additional expectations not required for individuals:
- 12-month repayment cap
All business installment agreements must be paid in full within 12 months, regardless of the tax liability amount. There are no tiered term lengths like those available to individuals.
- Detailed financial disclosures required
All businesses must submit a collection information statement (Form RO-1063), plus a separate RO-1062 for each officer, partner, or owner. This ensures the department has full visibility into the business’s financial standing.
- Automatic bank drafts required
Like individual plans, business agreements require a direct debit from a checking or savings account. Payments must be timely, and your financial institution must have adequate funds available to avoid triggering default.
- Responsible party liability
If the business defaults, the NCDOR may issue a tax warrant or file a Certificate of Tax Liability against the individuals responsible, holding them personally accountable for the unpaid debt.
How to Apply for a Business Plan
To initiate the agreement process, follow these steps:
- Wait for official notice
Do not apply until the business receives a Notice of Collection or final bill. The department does not allow you to request a plan in advance.
- Submit the required forms
Complete and send.
- Form RO-1033 – the main installment agreement request
- Form RO-1063 – business collection information statement
- Form RO-1062 – one per officer, owner, or partner
- Attach financial documents
Include three months of bank statements for the business, income and expense records, and any documents supporting hardship or seasonal income fluctuation.
- Propose a payment schedule
The plan must pay off the entire balance within 12 months. You may propose either equal installments or variable payments that reflect your cash flow.
- Respond to NCDOR requests
The department may ask for additional information to verify your ability to pay. Failing to respond will delay or cancel your application.
What Happens If You Default
Failing to follow the terms of your installment agreement has serious and immediate consequences. The North Carolina Department of Revenue (NCDOR) does not offer flexible reinstatement options like the IRS does. If your scheduled payment is late or returned, or if you fail to provide additional information when requested, your plan may be terminated—and full enforcement begins.
Here’s what you can expect if your plan goes into default:
Immediate Termination of the Agreement
- The moment your financial institution misses or rejects a scheduled payment, it cancels your agreement without further notice.
- There is no grace period for general late payments. The only exception is for returned payments due to insufficient funds—you have 10 days to replace it to avoid default.
20% Collection Assistance Fee
- Upon default, the NCDOR may apply a collection assistance fee equal to 20% of the remaining tax liability.
- For example, if you still owe $10,000, this adds a $2,000 penalty to your balance—significantly increasing your debt.
Resumption of Full Collection Actions
Default triggers aggressive enforcement, including:
- Wage garnishment: Employers are ordered to withhold 10% of your gross wages until the entire balance is paid.
- Bank account levy: The state may seize all available funds from your bank account or savings account without further notice.
- Tax warrant and property seizure: The NCDOR can issue a tax warrant authorizing seizure and sale of personal or business property.
No Reinstatement Option
- North Carolina does not allow taxpayers to request an installment plan again for the same tax periods once a default has occurred.
- Your only options are to pay taxes in full or face continued collection action.
Continued Accrual of Interest and Penalties
- Even during enforcement, interest and the late payment penalty continue to accrue on the unpaid debt.
- These fees can dramatically increase your total obligation if enforcement stretches over several months.
How to Avoid Default
To avoid termination and legal action, taxpayers should:
- Submit payments at least 10–15 days before the due date to ensure processing.
- Monitor account number changes if switching banks, and notify the department immediately.
- Keep funds available to prevent returned payments.
- Remain current on all new tax returns and estimated income taxes throughout the entire term of your agreement.
- Contact a licensed tax professional early if you anticipate difficulty.
Comparing North Carolina and IRS Payment Plans
While both the NCDOR and the IRS offer installment agreement programs, they operate under different rules, timelines, and expectations. Understanding these distinctions is essential for anyone managing both state and federal tax debt.
The table below outlines the main differences between North Carolina and IRS payment plans:
Comparison Table: IRS vs. North Carolina
1. Application Timing
- IRS: Can apply proactively, before formal collection action.
- NCDOR: Must wait for an official notice before applying.
2. Setup Fees
- IRS: $0–$178 depending on payment method and income status.
- NCDOR: No fees charged.
3. Repayment Term Length
- IRS: Up to 72 months (6 years).
- NCDOR: 15–50 months for individuals; limited to 12 months for businesses.
4. Collection During Agreement
- IRS: Generally paused once a plan is active.
- NCDOR: Collections may continue, including lien filings.
5. Reinstatement After Default
- IRS: Reinstatement allowed within 30 days.
- NCDOR: Not allowed—must pay full balance or face enforcement.
6. Payment Methods
- IRS: ACH, check, credit/debit card, or EFTPS.
- NCDOR: Must use direct bank draft.
7. Documentation Requirements
- IRS: Only required for non-standard terms.
- NCDOR: Often required upfront, especially for business accounts.
8. Interest Rate (2025)
- IRS: 7% (based on federal underpayment rate).
- NCDOR: 9% (state interest = federal rate + 2%).
9. Lien/Levy Timeline
- IRS: Requires notice and appeal rights before action.
- NCDOR: May take action immediately after a default.
Key Differences Explained
- Application process
The IRS allows you to request a plan before collection begins, which provides more flexibility. North Carolina requires that you first receive an official notice before submitting your installment agreement request.
- Repayment terms
IRS plans can last longer, especially for larger debts. In contrast, North Carolina plans to max out at 50 months for individuals and just 12 months for businesses, no matter the tax liability.
- Enforcement policies
While the IRS generally pauses collection, North Carolina may still force collection through liens or garnishments even during an active agreement, especially if you're not fully compliant with tax returns or scheduled payments.
- Reinstatement options
The IRS offers a limited window to fix a missed payment and restore your plan. North Carolina does not provide a grace period; once you default, the entire balance is due immediately, and collection actions will resume without delay.
- Interest and penalties
North Carolina’s late payment penalty and 9% state interest rate can quickly increase your balance, making it pricier than a federal plan if paid late.
Managing Both Plans at the Same Time
Many taxpayers are enrolled in both federal and state agreements. Here’s how to approach dual obligations:
- Track separate due dates
The IRS and NCDOR operate independently. Always confirm the due date and method of scheduled payment for each.
- Prioritize based on enforcement risk
If you're short on funds, prioritize the North Carolina payment. The state moves faster and more aggressively in issuing garnishments and levies than the IRS.
- Consider hardship relief
The IRS may offer short-term payment plans or hardship options like Currently Not Collectible status. North Carolina does not provide these formal protections.
- Coordinate with a professional
A licensed tax professional can help you balance payments, gather required financial information, and respond to information requested by both agencies.
Frequently Asked Questions
What is the difference between an installment payment agreement and a payment agreement?
In practice, both terms are often used interchangeably. However, within North Carolina's tax system:
- A payment agreement refers to any approved plan to pay off state tax liability over time.
- An installment payment agreement specifically refers to a structured plan authorized by the NCDOR that breaks the total debt into defined installment payments, usually withdrawn monthly from a bank or savings account.
This distinction matters when completing forms or speaking with a representative. If you’re applying to pay your taxes over time, use Form RO-1033, labeled the Installment Agreement Request.
Will enrolling in a North Carolina installment plan affect my federal tax refunds?
No, entering into a North Carolina installment payment agreement does not directly affect your federal tax refunds. However, if your agreement falls into default and the debt remains unresolved, the North Carolina Department of Revenue may refer your case to the U.S. Treasury Offset Program.
In that case, the IRS could intercept your federal refund and apply it toward your state tax liability. To avoid this, make all scheduled payments on time and fully comply with the agreement terms.
Can I choose different tax payment options when setting up an agreement?
No. Under North Carolina’s system, tax payment options are limited to automatic monthly bank drafts. The department requires that all installment payments be withdrawn from a valid bank account or savings account.
Payments via credit card, debit card, check, or money order are not accepted once the agreement is in place. However, you may use those methods to make voluntary payments before your plan begins or to pay off your balance early.
Can I accelerate or modify my installment payments later on?
Yes, you can pay more than the agreed monthly amount or pay off the full balance early without penalty. The department encourages taxpayers who can pay tax immediately to do so, as it reduces overall interest. However, the department rarely approves modifications to your installment payments to lower the amount or extend the term after the agreement is active.
If your circumstances change significantly, you must contact the department and provide updated financial information to request a change.
What happens if I enter into an installment plan for the wrong tax period or subject?
Each installment agreement applies to specific tax periods and types of liability. If you mistakenly omit a tax subject (such as business withholding versus individual income) or exclude a particular year, the department may take one of the following actions:
- The department may reject your application entirely if the information does not match their records or fails to cover all applicable balances.
- The department may approve a partial agreement only for specific tax periods or types, leaving the rest unresolved.
- The department may require you to submit a second installment agreement request to address any remaining debt not covered in the first application.
Double-check that your tax year, account numbers, and liability types are accurate before applying to avoid this issue. Address all open balances in a single request to minimize processing delays and avoid duplicate installment payments whenever possible.
