§ 105-163.15. Failure by individual to pay estimated income tax; interest. - North Carolina Statutes

§ 105‑163.15.  Failureby individual to pay estimated income tax; interest.

(a)        In the case of anyunderpayment of the estimated tax by an individual, the Secretary shall assessinterest in an amount determined by applying the applicable annual rate establishedunder G.S. 105‑241.21 to the amount of the underpayment for the period ofthe underpayment.

(b)        For purposes ofsubsection (a), the amount of the underpayment shall be the excess of therequired installment, over the amount, if any, of the installment paid on orbefore the due date for the installment. The period of the underpayment shallrun from the due date for the installment to whichever of the following datesis the earlier: (i) the fifteenth day of the fourth month following the closeof the taxable year, or (ii) with respect to any portion of the underpayment,the date on which such portion is paid. A payment of estimated tax shall becredited against unpaid required installments in the order in which suchinstallments are required to be paid.

(c)        For purposes ofthis section there shall be four required installments for each taxable yearwith the time for payment of the installments as follows:

(1)        First installment – April15 of taxable year;

(2)        Second installment –June 15 of taxable year;

(3)        Third installment – September15 of taxable year; and

(4)        Fourth installment –January 15 of following taxable year.

(d)        Except as providedin subsection (e), the amount of any required installment shall be twenty‑fivepercent (25%) of the required annual payment. The term "required annualpayment" means the lesser of:

(1)        Ninety percent (90%)of the tax shown on the return for the taxable year, or, if no return is filed,ninety percent (90%) of the tax for that year; or

(2)        One hundred percent(100%) of the tax shown on the return of the individual for the precedingtaxable year, if the preceding taxable year was a taxable year of 12 months andthe individual filed a return for that year.

(e)        In the case of anyrequired installment, if the individual establishes that the annualized incomeinstallment is less than the amount determined under subsection (d), the amountof the required installment shall be the annualized income installment, and anyreduction in a required installment resulting from the application of thissubsection shall be recaptured by increasing the amount of the next requiredinstallment determined under subsection (d) by the amount of the reduction andby increasing subsequent required installments to the extent that the reductionhas not previously been recaptured.

In the case of any requiredinstallment, the annualized income installment is the excess, if any, of (i) anamount equal to the applicable percentage of the tax for the taxable yearcomputed by placing on an annualized basis the taxable income for months in thetaxable year ending before the due date for the installment, over (ii) theaggregate amount of any prior required installments for the taxable year. Thetaxable income shall be placed on an annualized basis under rules prescribed bythe Secretary. The applicable percentages for the required installments are asfollows:

(1)        First installment – twenty‑twoand one‑half percent (22.5%);

(2)        Second installment –forty‑five percent (45%);

(3)        Third installment – sixty‑sevenand one‑half percent (67.5%); and

(4)        Fourth installment –ninety percent (90%).

(f)         No interest shallbe imposed under subsection (a) if the tax shown on the return for the taxableyear reduced by the tax withheld under this Article is less than the amount setin section 6654(e) of the Code or if the individual did not have any liabilityfor tax under Part 2 of Article 4 for the preceding taxable year.

(g)        For purposes ofthis section, the term "tax" means the tax imposed by Part 2 ofArticle 4 minus the credits against the tax allowed by this Chapter other thanthe credit allowed by this Article. The amount of the credit allowed under thisArticle for withheld income tax for the taxable year is considered a payment ofestimated tax, and an equal part of that amount is considered to have been paidon each due date of the taxable year, unless the taxpayer establishes the dateson which all amounts were actually withheld, in which case the amounts sowithheld are considered payments of estimated tax on the dates on which theamounts were actually withheld.

(h)        If, on or beforeJanuary 31 of the following taxable year, the taxpayer files a return for thetaxable year and pays in full the amount computed on the return as payable, nointerest shall be imposed under subsection (a) with respect to any underpaymentof the fourth required installment for the taxable year.

(i)         Notwithstandingsubsections (c), (d), (e), and (h) of this section, an individual who is afarmer or fisherman for a taxable year is subject to the provisions of thissubsection.

(1)        One installment. – Theindividual is required to make only one installment payment of tax for thattaxable year. This installment is due on or before January 15 of the followingtaxable year. The amount of the installment payment must be the lesser of:

a.         Sixty‑six andtwo‑thirds percent (66 2/3%) of the tax shown on the return for thetaxable year, or, if no return is filed, sixty‑six and two‑thirdspercent (66 2/3%) of the tax for that year; or

b.         One hundred percent(100%) of the tax shown on the return of the individual for the precedingtaxable year, if the preceding taxable year was a taxable year of 12 months andthe individual filed a return for that year.

(2)        Exception. – If, onor before March 1 of the following taxable year, the taxpayer files a returnfor the taxable year and pays in full the amount computed on the return aspayable, no interest is imposed under subsection (a) of this section withrespect to any underpayment of the required installment for the taxable year.

(3)        Eligibility. – Anindividual is a farmer or fisherman for any taxable year if the individual'sgross income from farming or fishing, including oyster farming, for the taxableyear is at least sixty‑six and two‑thirds percent (66 2/3%) of thetotal gross income from all sources for the taxable year, or the individual'sgross income from farming or fishing, including oyster farming, shown on thereturn of the individual for the preceding taxable year is at least sixty‑sixand two‑thirds percent (66 2/3%) of the total gross income from allsources shown on the return.

(j)         In applying thissection to a taxable year beginning on any date other than January 1, thereshall be substituted, for the months specified in this section, the months thatcorrespond thereto. This section shall be applied to taxable years of less than12 months in accordance with rules prescribed by the Secretary.

(k)        This section shallnot apply to any estate or trust. (1959, c. 1259, s. 1; 1963, c. 785, ss. 3, 4; 1973, c.476, s. 193; c. 1287, s. 7; 1977, c. 657, s. 5; c. 1114, s. 8; 1985, c. 443, s.2; 1989, c. 692, s. 7.1; 1991 (Reg. Sess., 1992), c. 950, s. 1; 1997‑109,s. 2; 1998‑98, s. 71; 1998‑212, s. 29A.14(h); 2000‑126, s. 4;2005‑276, s. 6.37(l); 2007‑491, s. 44(1)a.)