The state either doesn't know, or won't say, how many people paid too much in tax penalty

Almost 700,000 people were over-penalized by North Carolina's Department of Revenue, but it's unclear whether everyone who paid too much on their tax bill has been refunded.

5 On Your Side first reported in November 2023 that people who were subject to the Late Tax Payment Penalty Rate got bills with a 10% penalty, when the correct penalty rate was actually just 5%.

The General Assembly changed the law to lower the penalty from 10% to 5%, but the North Carolina Department of Revenue was unable to complete all the code changes needed. So, incorrect bills were sent out with an insert letter explaining what happened, what the correct penalty rate should be and that any taxpayer who overpaid will eventually get a refund.

NCDOR now says they have fixed the coding problem.

While we know 683,637 people got tax bills that were incorrect, we do not know how many people overpaid the state nor whether everyone has been paid back, because NCDOR will not reveal that information.

During 5 On Your Side's November 2023 interview with David Roseberry, NCDOR's deputy secretary of information technology, our team asked how many people were paying the North Carolina Department of Revenue at the incorrect Late Tax Payment Penalty Rate of 10% because of this problem.

"We can't tell until it's basically completed and we've fixed it, then I can tell you in retrospect how many accounts we had to touch to manually correct," Roseberry said at the time.

5 On Your Side followed up with the NCDOR in February. A spokesperson told us "yes" the error has been corrected, but when asked how many people overpaid, they said "any metric shared would only be an estimate; therefore, we are unable to provide a hard number."

Our team followed up by asking how the Department of Revenue can be confident that everyone who overpaid them has been reimbursed if the department doesn't know those figures.

The spokesperson pointed us back to this statement which they originally sent in November 2023 when we first asked for comment on this situation: “NCDOR has endeavored to make sure that no person was over penalized. In instances where we have found that taxpayers overpaid the penalty, the Department has processes in place where corrections are made and refunds have/will be issued.”

Bottom line, the department that handles tax revenue for North Carolina either doesn't know or isn't saying, how many people paid too much.

And we could end up doing this all again in the coming year. While NCDOR says they updated the code in the state's tax system to last year's standards, the aging system is not capable of making the changes the General Assembly has prescribed to take effect on July 1, 2024.

That's when the late payment penalty rate becomes 2% for each month, or part of a month, that the payment is late, up to a maximum penalty rate of 10%.

"We did try to make that change in the mainframe, and we were unable to make that change," Roseberry said in November. "We cannot make that change."

They've now asked lawmakers to delay that new rate from taking effect until July 1, 2027.

A spokesperson says that date will allow NCDOR time to get a new tax system; they've already started to get funding for that replacement.

There is no timeframe for when the General Assembly will make a decision on that proposed change. So at this point, we don’t know if tax bills with late payment penalties sent out later this year will be correct.