Tax Professionals Handbook

• A Taxpayer may deduct 20% of the total amount of accelerated depreciation added to federal taxable income in taxable year 2008 in each of the first five taxable years beginning on or after January 1, 2009.
• Taxpayer is required to add to federal taxable income 85% of the amount allowed as a special accelerated depreciation deduction under section 168(k) of the Code for property placed in service after December 31,2007, but not before January 1,2009. In addition, a taxpayer who was allowed a special accelerated depreciation deduction in taxable year 2007 for property placed in service for that period, and whose North Carolina taxable income for that year reflected that accelerated depreciation deduction must add to federal taxable income in the taxpayer’s 2008 taxable year an amount equal to the applicable percentage of the deduction amount allowed in the 2007 taxable year. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes.
• A deduction is allowed from taxable income to the extent each item is included in taxable income, for 5% of the gross purchase price of a qualified sale of a manufactured home community. A qualified sale is a transfer of land comprising majority of the manufactured home community leaseholders or to a nonprofit organization that represents such a group. To be eligible for this deduction, a taxpayer must give notice of the sale to the North Carolina Housing Finance Agency under G.S. 42-14.3
• The amount of a donation made to a nonprofit organization or unit of State or local government for which a credit is claimed under G.S. 105-129.16H. The credit was expanded to include a unit of State or local government.
• The credit for North Carolina State Ports Authority wharfage, handling, and throughout charges was scheduled to sunset for taxable years beginning on or after January 1, 2009. The credit now sunsets effective for taxable years beginning on or after January 1,2014.
• A refundable Earned Income Tax Credit (EITC) is available to certain taxpayers. In order to better ensure taxpayers receive the tax benefits for which they qualify, software companies producing computer programs for tax calculation should design all tax calculation software, other than forms library products, to automatically compute an individual’s eligibility for the State and Federal earned income tax credit when (1) the taxpayer is a North Carolina resident and (2) the taxpayer is preparing both the federal and North Carolina individual income tax returns with the tax calculation software.
• Qualified Business Venture Tax Credit Corp has been increased to $7,500,000.
• The personal exemption adjustment increased from $900 to $1000 per exemption for taxpayers whose adjusted gross income is less than $100,000 if married filing joint/qualifying widow (er); $80,000 if head of household; $60,000 if single; and $50,000 if married filing separately. For taxpayers with an adjusted gross income exceeding the above limits, the personal exemption adjustment increased from $1400 to $1500 per exemption.
• Credit for Adoption Expenses may be claimed on the North Carolina return of 50% of the allowable adoption tax credit claimed on the federal return. A part-year resident or nonresident is allowed the credit in the proportion that federal taxable income (as adjusted) is taxable to North Carolina. Any unused portion of this credit may be carried forward for the next succeeding five years.
• NCDOR is requesting that all online filers provide an IP address.
• Executor name is no longer required for deceased taxpayers.
• The multiplier changed from .3333 to .6666 on the Personal Exemption Adjustment Worksheet.
• Additional reject codes have been added.
• Forms 8839 (Qualified Adoption Expenses), Form 4972 (Lump Sum Distribution), Schedule D-1 and Schedule EIC

Reminders:

• A taxpayer does not have to submit any supporting documentation for an e-filed return for the following: Bailey settlement deduction, other deductions from federal taxable income, other additions to federal taxable income, 1099s, tax credit for taxes paid to another state or country, etc. The Department will contact the taxpayer if any supporting documentation is needed.
• Taxpayers are required to submit Form NC-478 and/or Forms NC-478A thru L if a business incentive or energy tax credit is claimed on an e-filed return. All Forms NC-478 and series A thru L should be mailed to the North Carolina Department of Revenue, PO Box 25000, Raleigh NC 27640-0500 within 48 hours after submitting the electronic individual income tax return. Individual income tax credits associated with Form NC-478 and series A thru L include but are not limited to:
  • Credit for investing in machinery and equipment
  • Credit for creating jobs
  • Credit for research and development
  • Credit for worker training
  • Credit for investing in central office or aircraft facility property
  • Credit for technology commercialization
  • Credit for development zone projects
  • Credit for nonhazardous dry-cleaning equipment
  • Credit for investing in low-income housing
  • Credit for use of North Carolina ports
  • Credit for investing in renewable energy property
• Taxpayers are required to submit Form NC K-1 to the NCDOR for an e-filed return if the return shows tax payments from a partnership or S corporation. The form(s) should be mailed to the North Carolina Department of Revenue, PO Box 25000, Raleigh NC 27640-0001 within 48 hours after submitting the electronic individual income tax return.
• The North Carolina direct deposit should not be connected to RALs or Bonus Checks (G.S. 143.3.3 – Prohibits RAL on State Refund). The NC direct deposit is a true direct deposit, which requires a checking or savings account number and a routing transit number from the taxpayer that can show acceptable proof-of-account of their designated financial institution. RAL accounts are temporary accounts and in some instances, deposits cannot be made before these accounts are closed.