North Carolina Form CD-405 is the C-Corporation Tax Return that every C-corporation doing business in North Carolina must file with the North Carolina Department of Revenue to report both the corporate income tax and the annual franchise tax. The form combines two taxes on one return, and it is governed by N.C.G.S. Chapter 105, Article 4, which sets the rules for franchise and income tax computation, apportionment, and filing.
A small mistake on CD-405 can be expensive. The NCDOR charges a 10% late-filing penalty plus a separate 10% late-payment penalty, on top of monthly interest, and rejects roughly one in ten paper returns for missing federal Form 1120 attachments according to agency processing notes. This guide walks you through every box, schedule, and signature line so you file once and file right.
- 📋 What CD-405 actually does and which corporations must file it
- 🧾 Every line, schedule, and box explained in plain English
- 🧮 Three filled-out scenarios (in-state small C-corp, multistate, final/short-year)
- 🏦 Filing channels, fees, deadlines, and how to keep proof of filing
- ⚠️ The most expensive mistakes filers make and how to dodge them
What the Form Is and Who Must File It
Form CD-405 is the combined corporate income and franchise tax return that North Carolina uses to assess two separate taxes on the same return. The income tax is imposed under N.C.G.S. § 105-130.3 at a flat 2.25% rate for the 2025 tax year, with the rate scheduled to phase down toward zero by 2030. The franchise tax is imposed under N.C.G.S. § 105-122 and is calculated on North Carolina apportioned net worth.
Every domestic C-corporation chartered in North Carolina, every foreign C-corporation doing business in North Carolina, and every limited liability company that has elected federal C-corporation treatment under Subchapter C must file CD-405. The 2025 CD-405 instructions confirm that “doing business” includes owning real or personal property in the state, having employees in the state, deriving income from sources in the state, or holding inventory in the state. The form covers calendar-year 2025 returns and fiscal years that begin in 2025.
S-corporations file Form CD-401S instead. Insurance companies subject to gross premiums tax, certain captive REITs, and tax-exempt nonprofits filing Form CD-405 only when they have unrelated business income follow modified rules. A corporation that is part of an affiliated group and has been ordered or permitted to file a combined return must also attach Form CD-405 CW under N.C.G.S. § 105-130.5A, the transfer-pricing and forced-combination statute.
The revision date printed in the lower corner of the 2025 form reads Web 7-25, meaning the official PDF was released by NCDOR in July 2025. Always confirm you are using the matching tax-year version because the franchise tax rate schedule and income tax rate change yearly. Filing the wrong year’s form is one of the most common reasons NCDOR returns a paper filing as unprocessable.
Before You Start: Documents and Information You Need
Open a folder before you touch the form. Gathering everything up front saves you from stopping mid-return and losing your place, and it prevents the math errors that come from typing numbers from memory.
- Federal Form 1120 with all schedules. NC starts with federal taxable income, so a missing 1120 stops processing cold per the NCDOR instructions.
- Federal Schedule M-1 or M-3 reconciliation. Required when total assets are $10 million or more, and used to verify book-to-tax adjustments.
- Federal Employer Identification Number (FEIN). Mismatched FEINs between the federal 1120 and CD-405 trigger an NCDOR hold.
- North Carolina Secretary of State ID number. Found on your annual report at the NC Secretary of State business search; without it, the franchise tax will not post to your corporate file.
- Prior-year CD-405. Needed to carry over net loss balances, overpayments applied, and prior franchise tax base.
- Detailed balance sheet at year-end, with separate columns for beginning and ending balances, used for Schedule D and net-worth calculation.
- Apportionment workpapers. Sales by destination, with market-based sourcing for services as required by N.C.G.S. § 105-130.4(l).
- North Carolina credit forms (such as NC-478) and any pass-through K-1s showing NC withholding.
- Estimated payments log. Pull totals from the NCDOR online business services account so Line 26 ties to NCDOR records.
- Articles of incorporation, dissolution, or merger if you mark the Initial or Final return box; missing documents delay account closure.
Where to Get the Form and How to Access It
Download the official 2025 Form CD-405 PDF and the matching CD-405 instructions directly from the NCDOR website. Both files are free, fillable, and printable. Avoid third-party sites except as a backup, because earlier-year forms float around the internet and using a 2024 form for a 2025 return is an automatic rejection.
You can also access the form through approved eFile vendors such as Thomson Reuters, CCH, Drake, and Lacerte, all of which transmit CD-405 through the IRS Modernized e-File (MeF) program in a federal/state combined return. NCDOR strongly prefers eFile because it cuts processing time from 12 weeks for paper to roughly 2 weeks for accepted electronic returns. The MeF channel also validates math, FEIN, and Secretary of State numbers in real time.
If you need a paper copy and cannot print, call NCDOR taxpayer assistance at 1-877-252-3052, and the agency will mail the form within 7 to 10 business days. Local NCDOR service centers in cities like Raleigh, Charlotte, Greensboro, Asheville, and Fayetteville keep current-year stock on hand.
The form itself is six pages plus schedules. Page 1 captures identifying information and computes franchise and income tax; pages 2 through 6 hold Schedules A through O for additions, subtractions, balance sheet, and apportionment. Combined filers add the CD-405 CW worksheet.
Step-by-Step: How to Fill Out Form CD-405 Line by Line
Work through the form in printed order. Skipping ahead to the tax lines and backfilling the schedules later is the single biggest source of math mismatches. Each H3 below corresponds to a real field, line, or schedule on the official form.
Header: Tax Year and Fiscal Year Dates
The header at the top of page 1 asks for the Beginning and Ending dates of the tax year. Calendar-year filers leave the dates blank and check the calendar-year box; fiscal-year filers enter dates in MM-DD-YY format. Acme Holdings, Inc. with a June 30 year-end writes 07-01-25 and 06-30-26 in the two boxes.
If you change your federal tax year, you must use the same period in North Carolina, per the 2025 instructions. A common mistake is reporting a 12-month period when you actually had a short year due to a merger, which causes franchise tax to be overstated. The misconception that you can “round up” to a full year for franchise purposes is wrong; a short-year return prorates franchise tax monthly.
Legal Name, Address, and FEIN
Enter the corporation’s exact legal name as shown on the IRS CP-575 letter and on the NC Secretary of State registration. Use all caps, no punctuation, and the same address used on federal Form 1120. MARIA LOPEZ CONSULTING INC writes that name in the legal-name box and 123 MAIN ST, RALEIGH NC 27601 in the address block.
If you use a P.O. Box, enter the P.O. Box on the street line because NCDOR mails refund checks and notices to the address on file. A common mistake is entering a “doing business as” name instead of the legal name; this will mismatch the FEIN against IRS records and freeze the return. The misconception that NCDOR pulls the legal name from the FEIN automatically is false; the agency uses what you type.
Secretary of State ID Number
This is the 7-digit ID issued by the NC Secretary of State when the corporation registered in North Carolina. Type it left-justified with leading zeros if needed. 0123456 is a valid format.
If your corporation is foreign and never registered with the Secretary of State, you must apply for a Certificate of Authority before filing CD-405, or NCDOR will assess franchise tax without a corporate file to post it to. The mistake here is leaving the box blank, which causes franchise tax payments to sit in suspense. The misconception that the FEIN substitutes for the Secretary of State number is wrong; both are required.
NAICS Code
Enter the 6-digit North American Industry Classification System code that best describes your primary North Carolina activity. 541211 covers offices of certified public accountants. Use the same NAICS code that appears on federal Form 1120 to avoid mismatches.
If you operate in multiple industries, pick the one with the largest gross receipts. The mistake here is using an outdated 4-digit SIC code; NCDOR will reject the return at intake. The misconception that the NAICS code affects tax rate is false; the rate is flat, but the code drives audit selection.
Filing Status Boxes (Initial, Final, Amended, Short Period, Combined)
These ovals at the top of page 1 control how the return is processed. Initial Return applies the first time a corporation files; Final Return closes the corporate account; Amended Return requires a complete re-filing of the form, not just changed pages. Mark only one primary box.
If you mark Final Return, attach the Articles of Dissolution filed with the Secretary of State, or NCDOR will keep your account open and continue billing. The mistake here is marking Amended without including Schedule J explanation, which causes immediate rejection. The misconception that an amended federal return automatically amends the NC return is wrong; you must file a separate amended CD-405 within 6 months of the federal change.
Line 1: Gross Receipts or Sales
Enter total gross receipts or sales from federal Form 1120, line 1a, before returns and allowances. Acme Manufacturing with $4,500,000 of gross receipts writes 4,500,000. Do not include sales tax collected from customers.
If you operate on a cash basis but file federal on accrual, use the federal accrual figure here, because NC starts from federal taxable income. The mistake is entering net sales after returns; that figure belongs on line 1c of federal 1120, not on this NC line. The misconception that you can omit non-NC sales is wrong; gross receipts is total worldwide, and apportionment happens later on Schedule O.
Line 2: Total Assets per Balance Sheet
Enter total assets at the end of the tax year, taken from federal Form 1120, Schedule L, line 15(d). Acme Manufacturing with $8,200,000 of total assets writes 8,200,000. Round to whole dollars; no cents.
If total assets are $10 million or more, you must also attach federal Schedule M-3, per IRS rules that NCDOR mirrors. The mistake is using book assets instead of tax-basis assets; NCDOR cross-checks against federal 1120. The misconception that this number affects franchise tax is wrong; franchise tax is based on Schedule C net worth, not gross assets.
Schedule A: Computation of Franchise Tax
Schedule A pulls from Schedule C (net worth) and Schedule O (apportionment) to compute franchise tax. Multiply apportioned net worth by $1.50 per $1,000 of base, with a minimum tax of $200 and a cap on the first $1,000,000 segment per N.C.G.S. § 105-122.
Carlos Mendez Trucking with $600,000 NC-apportioned net worth writes 900 in Schedule A, Line 1. If apportioned net worth is below $133,333, the minimum tax of $200 still applies. The mistake here is forgetting the $200 floor; NCDOR will bill the difference plus interest. The misconception that holding companies pay the full rate is wrong; qualified holding companies have a separate cap under the same statute.
Schedule B: Computation of Corporate Income Tax
Schedule B starts with federal taxable income, applies NC additions from Schedule H Part 1, subtracts NC subtractions from Schedule H Part 2, applies apportionment from Schedule O for multistate filers, and multiplies by the 2.25% rate for tax year 2025.
Janet Patel Software Inc. with $250,000 of NC taxable income writes 5,625 on Schedule B, Line 14. If you have a North Carolina net loss carryforward under N.C.G.S. § 105-130.8A, claim it on Line 11 with a separate worksheet. The mistake here is applying federal NOLs directly; NC NOLs are computed separately and limited to 15 years. The misconception that the federal 80% NOL limitation applies to NC is wrong; NC has its own rules.
Schedule C: Capital Stock, Surplus, and Undivided Profits (Net Worth)
Schedule C computes the net worth tax base for franchise tax. Add capital stock, paid-in capital, retained earnings, and other equity, then subtract treasury stock and accumulated other comprehensive losses. The result is total net worth, which is then apportioned on Schedule O.
Acme Manufacturing with $1,200,000 capital stock, $300,000 paid-in capital, and $500,000 retained earnings writes 2,000,000 on Schedule C, Line 6. The common mistake is forgetting to add back deferred tax liabilities that reduce equity for book purposes. The misconception that net worth equals book net worth is wrong; NC requires several adjustments listed on the schedule.
Schedule H: Additions and Deductions to Federal Taxable Income
Schedule H Part 1 lists state-specific add-backs such as state income taxes deducted federally, related-party interest under N.C.G.S. § 105-130.7B, and bonus depreciation differences. Part 2 lists subtractions such as US obligation interest and dividends from subsidiaries.
Janet Patel Software Inc. paid $12,000 in NC corporate income tax and writes 12,000 on Schedule H, Line 1. The mistake is forgetting to add back the NC franchise tax itself, which is also deducted federally. The misconception that bonus depreciation matches federal is wrong; NC decouples and requires an 85% add-back per the 2025 instructions.
Schedule O: Apportionment Factor
Schedule O computes the single sales factor used to apportion both income and franchise tax to North Carolina. Numerator equals NC sales; denominator equals everywhere sales. Service receipts use market-based sourcing under N.C.G.S. § 105-130.4(l), meaning sourced where the customer receives the benefit.
Carlos Mendez Trucking with $400,000 NC sales and $2,000,000 total sales writes 0.2000 (20%) on Schedule O, Line 4. The mistake is using cost-of-performance for services; NC moved to market-based sourcing for tax years beginning on or after January 1, 2020. The misconception that the apportionment factor cannot exceed 100% is wrong; throwback and throwout rules can push the factor higher in unusual cases.
Line 26: Estimated Tax Payments
Enter the total of all CD-429 estimated payments made during the year plus any prior-year overpayment applied. Pull this from your NCDOR business account so it ties to the agency’s records.
Acme Manufacturing paid $2,500 quarterly and writes 10,000 on Line 26. The mistake is including extension payments here; those go on Line 27 from Form CD-419. The misconception that you can skip estimates if you paid last year is wrong; under N.C.G.S. § 105-163.41, corporations owing more than $500 must make quarterly payments or face an underpayment penalty.
Signature Block
An officer of the corporation (president, treasurer, or other principal officer) must sign and date page 2. Print the signer’s title and a contact phone. Maria Lopez, President signs and dates 03-15-2026.
A paid preparer signs the lower block, including PTIN and firm FEIN. The mistake is having a non-officer (such as a controller without officer status) sign; NCDOR will treat the return as unsigned. The misconception that an electronic signature is invalid is wrong; eFile signatures using Form NC-8453C are accepted.
Three Filled-Out Examples Using Real Scenarios
The three scenarios below walk three different corporations through CD-405 from start to finish. Each table shows what the filer enters in the most important sections of the form.
Scenario 1: Maria Lopez Consulting Inc. (In-State Only, Small C-Corp)
Maria’s consulting firm operates only in Wake County, has no employees outside North Carolina, and earned $250,000 of federal taxable income in 2025.
| Form Section | What Maria Enters |
|---|---|
| Tax year header | Calendar year box checked |
| Legal name and address | MARIA LOPEZ CONSULTING INC, 123 MAIN ST, RALEIGH NC 27601 |
| FEIN | 87-1234567 |
| NC Secretary of State ID | 0987654 |
| NAICS code | 541611 |
| Schedule O apportionment factor | 1.0000 (100% NC) |
| Schedule C net worth | 400,000 |
| Schedule A franchise tax | 600 |
| Schedule B income tax | 5,625 |
| Total tax due (Line 28) | 6,225 |
Scenario 2: Carlos Mendez Trucking LLC (Multistate, Single Sales Factor)
Carlos’s trucking company is a C-corporation operating in NC, SC, and VA, with $2,000,000 in total receipts and 20% sourced to North Carolina.
| Form Section | What Carlos Enters |
|---|---|
| Tax year header | Calendar year box checked |
| Legal name and address | CARLOS MENDEZ TRUCKING INC, 800 IVY LN, CHARLOTTE NC 28202 |
| FEIN | 56-9876543 |
| Schedule O Line 1 NC sales | 400,000 |
| Schedule O Line 2 total sales | 2,000,000 |
| Schedule O Line 4 apportionment | 0.2000 |
| Schedule C total net worth | 3,000,000 |
| NC apportioned net worth | 600,000 |
| Schedule A franchise tax | 900 |
| Schedule B income tax (2.25% × NC income) | 4,500 |
Scenario 3: Janet Patel Software Inc. (Final/Short-Year Return After Dissolution)
Janet’s software company dissolved on June 30, 2025, after filing Articles of Dissolution with the NC Secretary of State. The short-year return covers January 1 to June 30, 2025.
| Form Section | What Janet Enters |
|---|---|
| Tax year header | 01-01-25 to 06-30-25 |
| Final Return oval | Marked |
| Short Period oval | Marked |
| Legal name and address | JANET PATEL SOFTWARE INC, 50 OAK DR, DURHAM NC 27701 |
| FEIN | 45-1112223 |
| NAICS code | 541511 |
| Schedule C net worth | 200,000 |
| Schedule A franchise tax (prorated 6/12) | 200 (minimum) |
| Schedule B income tax | 2,250 |
| Attachment | Articles of Dissolution copy |
How to File the Completed Form
You may file CD-405 electronically or on paper. NCDOR strongly prefers eFile because it cuts processing from 12 weeks to about 2 weeks per the eFile for businesses page. Most corporations are eligible for eFile through an approved tax software vendor.
eFile through MeF: use Drake, Lacerte, CCH, UltraTax, or Thomson Reuters GoSystem. The fee is set by the software vendor (often $35–$100 per state return). Payment is by ACH debit, credit card, or eServices direct pay. Keep the MeF acknowledgement; that is your proof of filing.
Paper filing: print, sign, and mail to North Carolina Department of Revenue, P.O. Box 25000, Raleigh, NC 27640-0500. There is no filing fee, but enclose payment voucher CD-V with a check or money order payable to NC Department of Revenue. Use certified mail with return receipt; that postmark plus receipt is your proof of timely filing under the mailbox rule.
In person: drop off at any NCDOR service center such as the Raleigh office at 501 N. Wilmington Street. The clerk will date-stamp a copy as your proof. There is no walk-in fee. Fax filing is not accepted for CD-405. The deadline is the 15th day of the 4th month after year-end (April 15 for calendar-year filers) per N.C.G.S. § 105-130.17. For an automatic 6-month extension, file Form CD-419 with payment of the expected tax by the original due date.
What Happens After You File
After NCDOR receives your return, the agency runs automated checks against the IRS 1120, your Secretary of State file, and your prior CD-405. eFiled returns process in about 2 weeks; paper returns take 8 to 12 weeks per the NCDOR processing guide. If everything reconciles, NCDOR issues a refund (if any) by ACH or paper check.
If NCDOR finds a math error, mismatched FEIN, or missing federal 1120, the agency mails a Notice of Adjustment or Notice of Tax Assessment. You have 45 days to respond or request a departmental review, per N.C.G.S. § 105-241.11. Missing the 45-day window converts the notice into a final assessment that can only be challenged in the Office of Administrative Hearings.
Audit selection happens up to 3 years after the later of the due date or filing date, per N.C.G.S. § 105-241.8. Apportionment factor disputes and related-party add-backs are the most common audit issues. Keep workpapers, federal returns, and intercompany agreements for at least 6 years.
Mistakes to Avoid When Filling Out the Form
- Filing the wrong tax year version of CD-405; consequence: NCDOR rejects the return and may assess late-filing penalties on the corrected version.
- Leaving the Secretary of State ID blank; consequence: franchise tax payment goes to suspense and the corporate account stays out of compliance.
- Using a DBA name instead of legal name; consequence: FEIN mismatch with IRS, processing freeze.
- Forgetting to add back NC franchise tax on Schedule H; consequence: understated income, underpayment penalty plus interest.
- Using cost-of-performance instead of market-based sourcing for services; consequence: apportionment factor disallowed and recalculated upward.
- Skipping the $200 minimum franchise tax; consequence: NCDOR bills the difference plus 10% late-payment penalty.
- Applying federal 80% NOL limitation to NC taxable income; consequence: wrong NC NOL utilization, audit adjustment.
- Including non-officer signature on page 2; consequence: return treated as unsigned and unfiled.
- Marking Amended without attaching Schedule J explanation; consequence: amended return rejected, original assessment stands.
- Mailing payment without CD-V voucher; consequence: payment not posted to the correct period and account.
- Forgetting the 85% bonus depreciation add-back; consequence: understated NC income, underpayment with interest.
- Filing CD-405 instead of CD-401S after a valid S-election; consequence: double tax exposure and shareholder K-1 confusion.
Do’s and Don’ts
- Do download the form fresh from NCDOR each year because rates and add-backs change.
- Do reconcile Line 26 estimated payments to the NCDOR eServices account before submitting.
- Do attach a complete federal Form 1120, including all schedules and statements.
- Do file CD-419 with payment if you cannot file by the original due date.
- Do keep workpapers for apportionment, net worth, and intercompany transactions for at least 6 years.
- Do eFile when possible; processing time is roughly 6x faster than paper.
- Don’t paraphrase form labels; use the exact line names and box numbers printed on the official form.
- Don’t sign as a non-officer; only an officer’s signature counts under N.C.G.S. § 105-130.17.
- Don’t combine income from related entities unless permission to file combined has been granted.
- Don’t ignore the 45-day response window on a Notice of Adjustment.
- Don’t use a prior-year form; rates change annually and old forms are auto-rejected.
- Don’t omit the $200 minimum franchise tax even if your apportioned net worth is small.
Pros and Cons of Filing on Your Own vs. With Help
- Pro of pro se filing: no preparer fees, which can run $1,500 to $5,000 per CD-405 for multistate corporations.
- Pro of pro se: full visibility into your numbers and direct ownership of the audit trail.
- Pro of pro se: faster turnaround when the return is simple and in-state only.
- Pro of using a CPA: experience with apportionment, market-based sourcing, and combined-return mechanics.
- Pro of using a CPA: representation rights before NCDOR and federal IRS.
- Con of pro se: high risk on Schedule O apportionment, the most common audit issue.
- Con of pro se: time investment of 10 to 30 hours for a multistate filer.
- Con of using a CPA: cost, especially for small corporations where tax due may be near the $200 minimum.
- Con of using a CPA: potential delays if the firm is overloaded during March and April.
- Con of using a CPA: data-handoff risk; NDAs and secure portals are essential.
CD-405 vs. CD-401S at a Glance
| Feature | CD-405 / CD-401S |
|---|---|
| Filer | C-corporations file CD-405; S-corps file CD-401S |
| Income tax rate | CD-405: 2.25% flat for 2025; CD-401S: pass-through to shareholders or PTET election |
| Franchise tax | Both pay franchise tax on apportioned net worth |
| Federal starting point | CD-405: Form 1120; CD-401S: Form 1120-S |
| Combined return option | CD-405 only, with NCDOR permission |
FAQs
Is Form CD-405 required for a single-member LLC?
No. A single-member LLC defaults to disregarded status and reports on the owner’s return; CD-405 is required only if the LLC elected federal C-corporation treatment by filing IRS Form 8832.
Is the $200 minimum franchise tax due even with no income?
Yes. Every active C-corporation owes at least $200 in franchise tax under N.C.G.S. § 105-122, regardless of profit or loss for the year.
Can CD-405 be amended electronically?
Yes. Most approved eFile vendors transmit amended CD-405 returns through MeF; mark the Amended oval and include Schedule J explaining each change.
Do I enter total assets in Box 2 in dollars or thousands?
No. Box 2 takes whole dollars, not thousands; entering 8200 instead of 8,200,000 will cause a clear math mismatch with federal Schedule L.
Do service receipts get sourced where performed or where received?
No. Services are sourced where the customer receives the benefit under market-based sourcing rules, not where the work is done.
Is bonus depreciation allowed in full on CD-405?
No. North Carolina decouples and requires an 85% add-back of federal bonus depreciation, recovered over the next 5 years.
Can I write Same as Federal in Schedule H?
No. Each line on Schedule H requires a specific dollar entry or a zero; Same as Federal will be treated as incomplete and the return rejected.
Is an extension automatic if I file CD-419?
Yes. Filing Form CD-419 with payment of expected tax by the original due date grants an automatic 6-month extension of time to file (not pay).
Does an officer have to sign in blue ink on a paper return?
No. Either blue or black ink is accepted; what matters is an original signature and a printed officer title.
Do I have to attach federal Form 1120 if I eFile?
Yes. Federal 1120 transmits as part of the MeF combined federal/state package; without it, NCDOR cannot validate the starting taxable income.
Can NC NOLs offset 100% of NC taxable income?
Yes. North Carolina does not apply the federal 80% NOL limitation, but carryforwards are limited to 15 years under N.C.G.S. § 105-130.8A.
Is CD-405 the right form after a federal S-election was revoked mid-year?
Yes. After the S-election ends, the entity files CD-405 for the C-corporation portion of the year and CD-401S for the S-corporation portion, marking short-period boxes on each.
Do I include sales tax collected from customers in Line 1 gross receipts?
No. Sales tax collected as a trustee for the state is excluded from gross receipts; reporting it inflates Line 1 and the apportionment denominator.
Is the Secretary of State ID the same as the FEIN?
No. They are two separate numbers; the FEIN comes from the IRS and the Secretary of State ID comes from the NC Secretary of State office.
Related reading
- How to Fill Out Georgia Form CD 405 (w/Examples) + FAQs
- How to Fill Out North Carolina Form CD-401S (w/Examples) + FAQs
- How to Fill Out North Carolina Form CD-419 (w/Examples) + FAQs
- How to Fill Out North Carolina Form D-400 (w/Examples) + FAQs
- How to Fill Out North Carolina Form D-410 (w/Examples) + FAQs
- How to Fill Out Virginia Form 500 (w/Examples) + FAQs
- How to Fill Out North Carolina Form AOC-CV-100 (w/Examples) + FAQs