2025 Form D-422

In general, you may owe interest if your withholding and timely estimated payments fall short of the smaller of 90% of your 2025 tax or 100% of your 2024 tax. The prior-year comparison requires a filed return covering 12 months. Review the exceptions in the D-422 instructions, including the less-than-$1,000 rule and the exception for no prior-year income tax liability.

Complete D-422, Part I, Lines 1 through 6. If your 2025 North Carolina income tax, reduced by tax credits and North Carolina withholding, is less than $1,000, you do not owe underpayment interest and can stop. This test does not subtract estimated tax payments. Reaching $1,000 does not by itself mean interest is owed.

You can use the short method if you made no estimated payments other than withholding, or if you paid the same estimated amount on each of the four payment due dates. Otherwise, use the regular method to calculate the underpayment and interest for each payment period. Follow the instructions included in the form for the method that applies to you.

The annualized income installment method may reduce a required installment when your income varies during the year. Complete Form D-422A and use its results in Part III of D-422, checking the box on Line 16. If you annualize income for one payment period, you must annualize it for every period.

Yes. The 2025 PDF includes general instructions, exceptions, and guidance for the short and regular methods. The North Carolina D-401 instructions also explain how to report underpayment interest on Form D-400, Line 26e. Always use the D-422 form for the same tax year as your return.

No. Keep D-422 for your records. Transfer the interest from Line 15 under the short method or Line 27 under the regular method to Form D-400, Line 26e. The interest increases the amount you owe or reduces your overpayment.