To fill out Form NC-4P, download the current version from the North Carolina Department of Revenue, complete the header with your name, Social Security number, address, pension claim number, and filing status, then use one of the three numbered lines to tell your payer what to do: check Line 1 for no state withholding, enter allowances on Line 2, or add a flat dollar amount on Line 3. Sign it, date it, and give it to your pension plan or IRA administrator, not to the Department of Revenue.1North Carolina Department of Revenue. NC-4P Withholding Allowance Certificate for Pension or Annuity Payments
Before You Start
Form NC-4P controls how much North Carolina income tax your payer holds back from periodic pension and annuity payments and from nonperiodic distributions such as IRA withdrawals. State law requires pension payers who withhold federal tax under IRC Section 3405 to also withhold North Carolina tax.2North Carolina General Assembly. North Carolina Code 105-163.2A – Pension Payers Must Withhold Taxes
If you file nothing, the payer uses defaults, and they are rarely kind. Periodic payments are withheld as if you were single with zero allowances (the heaviest standard rate), and nonperiodic distributions get a flat 4% taken out.3North Carolina Department of Revenue. Withholding Certificate for Pension or Annuity Payments For 2026, North Carolina taxes most retirement income at a flat 3.99%, so the math matters.4North Carolina Department of Revenue. Tax Rate Schedules
A quick boundary before you fill anything in: NC-4P covers only North Carolina state tax. Federal withholding on the same payment is handled on a separate IRS form and is not affected by anything you write on NC-4P.
Filling Out the Header
The top of the form asks for your first name, middle initial, last name, Social Security number, home address, and the claim or identification number on your pension or annuity contract. Get the Social Security number right. If the payer receives a form with a missing or incorrect SSN, it must ignore your instructions and fall back to single-with-zero-allowances withholding.
Then check one box for filing status:
- Single or Married Filing Separately
- Married Filing Jointly or Surviving Spouse
- Head of Household
Filing status controls which withholding table the payer applies to every payment, so pick the one you will actually use on your state return.
Line 1: No North Carolina Withholding
Check the Line 1 box if you want zero state tax withheld. When you check it, leave Lines 2 and 3 blank; they no longer apply.
This option fits three situations: you expect to owe no North Carolina tax for the year, your retirement income qualifies for the Bailey exemption (see below), or you plan to cover your liability through quarterly estimated payments on Form NC-40 instead of through withholding.
One thing Line 1 cannot do: waive withholding on an eligible rollover distribution. The payer must withhold on those regardless of what you check.
Line 2: Number of Allowances
Enter the total number of withholding allowances you are claiming. Each allowance lowers the amount held back from each payment. The form includes a Personal Allowance Worksheet that walks you through the count based on filing status, whether someone can claim you as a dependent, and your spouse’s income.
More allowances mean less withholding per payment. If your pension is your only income and it lands near the standard deduction for your filing status ($13,000 for single filers, $26,000 for married filing jointly in 2026), claiming enough allowances to bring withholding close to zero can be reasonable. Overclaiming to reduce withholding below what you owe carries a penalty (covered below), so stay within what the worksheet actually supports.
Line 3: Additional Withholding
Line 3 is a whole-dollar amount you want taken out of each payment on top of whatever the Line 2 allowance calculation produces. It is the cleanest way to cover tax on outside income (part-time work, rental, investment gains) through your pension check instead of writing quarterly estimated payment checks.
The form has one procedural requirement here: you cannot fill in Line 3 without also entering a number on Line 2, even if that number is zero.
Sign, Date, and Submit
An unsigned NC-4P is invalid. Sign it, date it, and send it to your pension plan administrator, IRA custodian, or other payer. Do not mail it to the North Carolina Department of Revenue; the payer is the one who keeps it on file and adjusts your checks.
Most administrators need one to two pay cycles to put a change into effect. The Pension Benefit Guaranty Corporation, for example, processes changes submitted by month-end within two pay cycles.5Pension Benefit Guaranty Corporation. Change Your Federal Tax Withholding If you need the change to hit by a specific payment date, ask your plan directly.
Keep a copy of every NC-4P you send. If a withholding dispute comes up later, you will want proof of what you asked for and when.
If You Qualify Under the Bailey Settlement
Retirees from qualifying North Carolina and federal government plans with five or more years of creditable service as of August 12, 1989, owe no North Carolina income tax on those retirement benefits under the Bailey v. State of North Carolina settlement.6North Carolina Department of Revenue. Bailey Decision Concerning Federal, State and Local Retirement Benefits Qualifying systems include:
- North Carolina Teachers’ and State Employees’ Retirement System
- North Carolina Local Governmental Employees’ Retirement System
- North Carolina Consolidated Judicial Retirement System
- Federal Employees’ Retirement System (FERS)
- United States Civil Service Retirement System (CSRS)
- North Carolina 401(k) and 457 plans, if you contributed or contracted to contribute before August 12, 1989
If you qualify, check the Line 1 box on your NC-4P so no state tax is withheld, and claim the deduction on Line 20 of Form D-400 Schedule S when you file, attaching your 1099-R.6North Carolina Department of Revenue. Bailey Decision Concerning Federal, State and Local Retirement Benefits One trap: if you roll a qualifying Bailey account into a non-qualifying retirement account, the exemption does not carry over, and distributions from the new account are taxable.
When to File a New Form
Your NC-4P stays in force until you replace it. File a fresh one whenever something shifts your state tax picture: marriage, divorce, the death of a spouse, a new income source, retirement from a second job, or a meaningful change in investment income. Checking your withholding after major life events is standard IRS guidance and applies equally on the state side.7Internal Revenue Service. Managing Your Taxes After a Life Event
A start-of-year review is also worthwhile. North Carolina has been lowering its flat rate in recent years, so a withholding level set two years ago may now pull more than you need.
Penalty for Overclaiming
If you submit an NC-4P with information that has no reasonable basis and it causes less tax to be withheld than should have been, North Carolina imposes a penalty equal to 50% of the shortfall. That is on top of the tax you still owe. Claiming a Bailey exemption you do not qualify for, or padding your allowance count past what the worksheet supports, is the fastest way to land there. If your withholding falls short for legitimate reasons, you can raise it on Line 3 of a new NC-4P or make quarterly estimated payments on Form NC-40 to close the gap.8North Carolina Department of Revenue. NC-40 Individual Estimated Income Tax