Key takeaways
- An S corporation incorporated or doing business in North Carolina files Form CD-401S every year, even if the federal S election is all the client thinks about.
- The extension for tax years beginning in 2025 or later is seven months, up from six, and it extends filing but not payment.
- The PTE election is made on a timely filed return and cannot be made or revoked after the return is filed.
- A nonresident shareholder with no agreement on file means the corporation owes estimated tax on that shareholder's share.
What the S corporation files in North Carolina
G.S. 105-131.7 requires an S corporation incorporated or doing business in the state to file an annual return, and NCDOR's form for it is Form CD-401S. The return lists each shareholder's name, address and Social Security or federal identification number, plus each shareholder's State-attributable and non-attributable income. It is due on the date the statute sets for C corporation returns, which is the 15th day of the fourth month after year end: April 15 for a calendar-year corporation.
Each shareholder also receives an NC K-1, and NCDOR lists an NC-K1 Supplemental Schedule and NC-PE for the owner's share of North Carolina additions and deductions. Scope the engagement as a K-1 package, not only the CD-401S.
The federal and state periods must match, so a client who changed fiscal year federally needs the same period on the state return.
Due dates for tax year 2025 and tax year 2026
For tax year 2026, a calendar-year corporation's CD-401S is due April 15, 2027. For tax year 2025 the original due date was April 15, 2026, and any client still on extension is close to the extended deadline now. Confirm the exact date on NCDOR before telling the client, because a weekend or holiday can move it.
The length of the extension changed. For tax years beginning on or after January 1, 2008 and before 2025, NCDOR gives six months. For tax years beginning on or after January 1, 2025, it is seven months from the original due date. So the tax year 2025 return and the tax year 2026 return both get the seven-month rule; the older six-month dates you may have saved in last year's calendar do not apply.
The extension does not extend payment. NCDOR says tax not paid by the original due date is subject to penalty and interest from that date. A client who owes entity-level tax, whether franchise tax, PTE tax or tax on a nonresident shareholder, needs the payment made in April even if the return goes in the following November.
How to extend the CD-401S
A corporation with an automatic federal extension gets an automatic state extension, but it must say so. The 2025 CD-401S instructions tell the filer to fill in the Federal Extension circle on page 1, and NCDOR's extension page says the taxpayer must certify on the North Carolina return that it was granted the federal extension.
A corporation without a federal extension files Form CD-419 by the statutory due date of the return. NCDOR does not require tax to be paid with the extension request, but the payment obligation stays.
Failure mode: the federal extension was filed, but nobody checked the circle on the NC return. Add a state checklist line for the extension confirmation and the circle.
Franchise tax on the S corporation
NCDOR's rate page says the S corporation franchise tax is $200 for the first $1,000,000 of the corporation's tax base, plus $1.50 per $1,000 of tax base above $1,000,000, and the minimum is $200. That structure applies to tax years beginning on or after January 1, 2019.
Worked example: a corporation with a tax base of 3 million owes $200 on the first $1,000,000, plus $1.50 for each of the 2,000 thousands above it, which is 3,000 more. A base under $1,000,000 owes $200. The rate page does not define the base, so tie it to the franchise tax lines on the return, not to book equity. The 2025 instructions also tell filers to disregard some franchise tax schedules on this return, so read them before building the workpaper.
Collect the year-end balance sheet, the fixed asset listing and any apportionment data, since the base is derived from them.
The PTE election for tax year 2026
An eligible S corporation can elect to pay North Carolina tax at the entity level. The tax is imposed at the individual income tax rate, which NCDOR lists as 4.25% for taxable years beginning in 2025 and 3.99% for taxable years after 2025, with further changes possible starting with tax year 2027. Run the numbers using the right rate for each year.
The election is made on a timely filed return by checking the Taxed PTE Election box. For tax years beginning on or after January 1, 2023, G.S. 105-131.1A says the corporation may not make or revoke the election after the return is filed, so the decision has to be made before filing, not by amending. Confirm eligibility first; NCDOR lists partnerships with ineligible partners as excluded, and S corporation eligibility follows the statute.
Estimated payments are required if the expected North Carolina liability is at least $500. For a calendar-year corporation the installments are due April 15, June 15, September 15 and December 15, paid with Form CD-429 PTE. For a 2026 calendar-year client, check what has been paid before the December 15 installment.
Federal and state interaction is the real decision. Entity-level tax is deductible by the S corporation federally, which is the usual reason to elect, but resident owners generally cannot claim a credit for entity-level tax another state imposed on the entity.
Nonresident shareholders
G.S. 105-131.7 requires the corporation to file an agreement for each nonresident shareholder. In it the shareholder agrees to file a return, pay North Carolina tax timely on the S corporation income, and accept North Carolina personal jurisdiction for collection. NCDOR lists NC-NA, Nonresident Shareholder Agreement, to be attached as a PDF to the e-filed CD-401S, and the CD-401S has a Has Nonresident Shareholders checkbox.
If the corporation does not timely file the agreement for a shareholder, it must pay estimated tax on that shareholder's behalf. The statute computes it at the rate in G.S. 105-153.7 on the shareholder's pro rata share of income attributable to the state, and the corporation may recover the payment from the shareholder. That payment is the firm's exposure when a new out-of-state shareholder joins in October and nobody collects a signature.
If the corporation is a taxed PTE, a nonresident shareholder whose only North Carolina income is the S corporation share does not have to file an individual return, as long as the entity pays the tax. A nonresident with other North Carolina income still files, and the Secretary can still require a return.
What to collect from the client
Request in one message so the client answers once. Wording: "For the North Carolina S corporation return I need the federal return and K-1s, the shareholder list with state of residence on December 31, a signed nonresident shareholder agreement for anyone living outside North Carolina, the year-end balance sheet, the fixed asset listing, and the dates and amounts of any North Carolina estimated payments." Send that as one message.
Add the questions that decide the filing: did any shareholder move in or out of North Carolina during the year, did ownership change, did the corporation make the PTE election in prior years and pay estimates on Form CD-429 PTE, and is a federal extension on file with a confirmation. Ask for the extension confirmation as a file, not a yes or no.
Collect shareholder tax IDs through a secure upload, not in the body of an email. If you use a document collection tool such as Usual, make the nonresident agreement a required item for each shareholder so that the missing signature shows up as an open request instead of a surprise in April.