Taxes for NC Retirees | Shock among state retirees as they discover owing the IRS thousands due to changes in pension tax deductions

RALEIGH, N.C. — Just a few weeks left to file your taxes and some North Carolina retirees are shocked to find out how much they owe in federal taxes due to changes to what’s withheld in federal taxes from state retiree’s pension checks.

Eddie Hall says, “I was flabbergasted. I didn’t know how to react. My wife and I are both on fixed incomes.”

Hall’s CPA let him know he will owe more than $2,400 in federal taxes.

“This was going to be a financial drain on me,” Hall says.

Hall a former North Carolina teacher and now retiree says in previous tax years, he always got a refund, but this year his CPA informed him, that Hall had zero withheld from his pension checks in 2023. Hall says he called the North Carolina Department of State Treasurer, and a representative explained the changes made for the 2023 tax year. He adds, “She said in December of 2022, all state retirees were notified electronically that you were going to have to do another application for withholding.”

Hall claims he was never notified of this change. ABC11 Troubleshooter Diane Wilson reached out to the NC Treasurer’s office and a representative said the state did not make this change.

They said the IRS changed tax withholding forms and requirements and the agency is no longer accepting the minimum withholding elections for pension recipients. Instead, a representative said state retirees have to update their withholdings in the system.

“In all honestly, I don’t recall getting anything because if I had, I would have been more proactive well, who wouldn’t?,” Hall tells ABC11.

A representative with the NC Treasurer’s office says to alert retirees of these changes, they took multiple steps at the beginning of 2023, including an email to 45,000 retirees they identified as being directly impacted by this change. Plus, posted on social media platforms bringing attention to the changes, along with a robocall, and posted on the state website for retirees.

The representative with the Treasurer’s office says as a result of these communications, they saw a 300% increase in tax withholding changes compared with the previous year. As for Hall after learning he owed more than $2,400 in federal taxes, he’s making sure this won’t happen next tax season.

Hall is not the only state retiree we have heard from who says they never got notice of the changes. If you’re a state retiree and have not logged into your account, make sure you do that, so you can update your withholdings for this tax year.

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