How does Bailey Vested work for retirement and filing income taxes for North Carolina?

[atm183]

My husband and I are both Bailey Vested and we were instructed that we did not need to file NC income taxes, so we have not since 2017.  Now we have received a notice from the NCDOR and we are completely at a loss.  Both of us have been retired 10+ years. We need to know what to do.

[xmasbaby0]

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[VolvoGirl]

I think they mean they haven't filed any NC returns at all.  They need info on the Bailey settlement.  They better go to a local tax accountant and get caught up.

[SteamTrain]

......you may not have had to pay "NC" taxes on those pensions if they were, in fact, Bailey eligible....but you probably did need to file tax returns for NC, even if those pension $$ were not taxed by NC.

The requirement to "File" an NC tax return is based on yoru "Federal" gross income, and not what is eventually taxed by NC.

1)  For 2017, if your "Federal" gross income was over $17,500 (for MFJ), you were required to file an NC tax return for 2017.

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Then that minimum filing level can be scaled up every year....like, checking the minimum Federal gross for 2020 was $21,500 for a MFJ couple.

i.e.

2) For 2022, if your "Federal" gross income was over $25,500 (for MFJ), you were required to file NC forms for 2022 too.

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Yep, as suggested above, you probably need to go to a local professional to get it all straightened out.   Get printouts of all your Federal forms for each year before you go.

[NCperson · Accepted solution]

@atm183 - personally, I would not see a professional to get this done, unless they do it for free.  it is too easy.  

First thing I would do it call NC DOR - they are quite nice and pick up the phone within 1 minute.   Explain the situation to them.  They know your Federal AGI (they get it from the IRS which is probably what kicked off the letter in the first place). 

Ask them what they need to clear up the situation. They may say just send them the 1099-R that shows you are Bailey eligible. 

Are you Bailey eligible from a State, County of Local pension in NC...or are you Bailey elgiible due to a federal pension.  The State pensions mark the 1099-Rs that are Bailey elgible so there can be no dispute.  The federal pensoin 1099-Rs are not so marked so that his a little different. 

That could preclude the need for an income tax return (but I am not sure). 

Since in the end if you are confident you do not owe any tax (and there are no penalties or interest as it will all be reversed), I would wait until February and go to an AARP or VITA site (what county / city in NC are you in?) and they will do the tax returns for free 

Just so we are on the same page, Bailey Eligible are State of NC pensions (including County and local pensions) or federal pensions where the taxpayer work start date was prior to August 12, 1984 (which means the pension vested prior to August 12, 1989. 

Were you required to file the federal return in those years? Who did that for you or did you do it yourself?

ps - note from my handle that I am in North Carolina so I am quite familiar with Bailey.