DRS: IP 96(7), Circular CT (7/98 version) - Employer's Tax Guide

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

IP 96(7)

Employer's Tax Guide

(effective July 1, 1998)

This guide and Withholding Tables are not subject to change until July 1, 2000.

Withholding Tables
Weekly
Bi-weekly
Semi-monthly
Monthly

Withholding
Calculation
Rules

Table
of
Contents

Form CT-W4 Form CT-W4NA Form CT-W4P

Additional Information for Employees Where Both Spouses Work

Frequent Income Tax Withholding Contacts

Forms and Publications Referenced in this Booklet

Calendar of Employer's Duties

Important Information for All Connecticut Employers

Withholding Instructions

Frequently Asked Withholding Questions

Comparison of Federal and Connecticut Filing Rules

Other Tax Forms

Contacting DRS


TABLE OF CONTENTS

Who is Required to Withhold Connecticut Income Tax?
How to Register for Withholding Tax

Employers
Payers of Nonpayroll Amounts
Household Employers
Agricultural Employers
Professional Athletes and Entertainers
Seasonal Employers

Voluntary Registration to Withhold Tax

Voluntary Registration by Persons Other Than Employers to Withhold Tax

What Income Is Subject to Connecticut Income Tax Withholding?

Wages

Resident Wages Subject to Connecticut Income Tax Withholding
Nonresident Wages Subject to Connecticut Income Tax Withholding

Nonpayroll Income

Pension and Annuity Plans
Gambling Winnings

Professional Athletes and Entertainers

What Payments Are Not Subject to Connecticut Income Tax Withholding?

Payments Not Subject to Federal Income Tax Withholding
Self-Employed Individuals
Interstate Commerce
Interstate Air Carriers
Nonresident Seaman

Wages Paid by the United States to Members of the Armed Forces
Withholding for Military Retirees
How to Withhold Connecticut Income Tax

Employee's Withholding or Exemption Certificate (Form CT-W4)

Employee's Claiming Exemption
Reporting Certain Employees to the Department of Revenue Services
Reporting New Employees to the Department of Labor

Determining How Much to Withhold From Employees

Employees Who do Not Return a Completed Form CT-W4

How to Use the Withholding Tables
Withholding for Daily/Miscellaneous Amounts
Determining How Much to Withhold From Nonresident Employees Who Work Partly Within and Partly Outside Connecticut
Supplemental Compensation

Supplemental Compensation Paid at the Same Time as Regular Wages
Supplemental Compensation Paid at a Different Time Than Regular Wages

How to Report and Remit Taxes Withheld

Withholding Payment Coupon (Form CT-WH)
Quarterly Reconciliation (Form CT-941)
Amended Quarterly Reconciliation (Form CT-941X)
Wage and Tax Statement
Annual Reconciliation (Forms CT-W3 and CT-1096)

Form CT-W3
W-2 Magnetic Media Filing
Form CT-1096
Form CT-1099 and W-2G Magnetic Media Filing
Request For Extended Due Date

Amended Annual Reconciliations
Corrections to Your Magnetic Media or W-2 Information Returns
Correction/Reorder Form (Form CTC)

Payment by Electronic Funds Transfer
Employer’s Liability for Taxes Withheld
Penalties and Interest

Late Payment
Late Filing Penalty
Interest
Required Informational Returns
Willful Evasion
Fraud
Criminal Penalties

How to Advise Employees to Have Enough Tax Withheld
What Records to Keep
How to Cancel Registration for Withholding Connecticut Income Tax
Effect of This Document

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Additional Information for Employees Where Both Spouses Work

AN 96(3.1), Information About Supplemental Withholding Tables for Joint Filers Who Both Earn Wage Income, Effective July 1, 1998

EMPLOYERS: Please post this announcement for your employees.

Employees who file a joint income tax return where both spouses work and choose filing status "A" on their Form CT-W4 should refer to the supplemental tables on Form CT-W4, effective July 1, 1998 and adjust their withholding accordingly. Employers should post AN 96(3.1), Information About Supplemental Withholding Tables for Joint Filers Who Both Earn Wage Income.


Important Income Tax Withholding Contacts

Connecticut Department of Revenue Services
1-800-382-9463
In-State (toll-free)
860-297-5962
Hartford Area or Out-of-State
Accounts Receivable/Billing 860-297-4771
Collection & Enforcement 860-297-5909 Electronic Funds Transfer
860-297-4973
Forms Unit (Press Option 2) 860-297-5962
TDD/TT
(Telecommunications Device for the Deaf) 860-297-4911
Connecticut Department of Labor
Employer Registration
860-263-3000
Form CT-W4 reporting for new employees
1-800-816-1108 (Fax number)
 
Internal Revenue Service
Tax Assistance
1-800-829-1040
Tax Forms and Publications
1-800-829-3676

 

 

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CONNECTICUT FORMS REFERENCED IN THIS BOOKLET

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CALENDAR OF EMPLOYER'S DUTIES

If any due date falls on a Saturday, Sunday or legal holiday, the next business day is the due date.

Each time a deposit of federal income tax is made

State of Connecticut
Department of Revenue Services
P.O. Box 5055
Hartford, CT 06102-5055

On or before April 30, July 31, October 31 and January 31

By January 31

By February 15

By February 16

By the last day of February

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IMPORTANT INFORMATION FOR ALL CONNECTICUT EMPLOYERS


Effect of IP 92(8.4) on Other Documents

All withholding requirements, tables and forms effective July 1, 1998, are included in IP 92(8.4), Connecticut Circular CT - Employer's Tax Guide, which updates and combines into one publication the withholding instructions and the withholding tables and forms. IP 92(8.3), Connecticut Circular CT Connecticut Circular CT and IP 96(7.2), Withholding Tables and Forms are modified and superseded and may not be relied upon after June 30, 1998.


Withholding Rates and Calculation Rules Changed Effective July 1, 1998, to Reflect Income Tax Reduction

The Connecticut withholding tables and withholding calculation rules in this publication reflect a reduction in the Connecticut income tax. All employers must use these updated withholding tables and calculation rules for wages paid on or after July 1, 1998. Continue to use the withholding tables and withholding calculation rules effective July 1, 1996 for wages paid before July 1, 1998.


New Due Date for Submitting Form CT-W4 to the Department of Labor

The due date for submitting Form CT-W4 to the Department of Labor (DOL) has changed. Employers must send each new and rehired employee's Form CT-W4 to DOL within 20 days from the date of hire. (See Reporting New Employees to the Department of Labor for details.)


Rules for Submitting Form CT-W4 to the Department of Revenue Services

Employers are only required to submit Forms CT-W4 to DRS in certain circumstances. Do not send exempt Forms CT-W4 to DRS unless the conditions under Reporting Certain Employees to the DRS are met.


Supplemental Tables for Joint Filers Where Both Spouses Work

Employees who file a joint income tax return where both spouses work and choose filing status "A" on their Form CT-W4, should refer to the supplemental tables on Form CT-W4, effective July 1, 1998, and adjust their withholding accordingly. Employers should post AN 96(3.1), Information About Supplemental Withholding Tables for Joint Filers Who Both Earn Wage Income.

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I N S T R U C T I O N S


 WHO IS REQUIRED TO WITHHOLD CONNECTICUT INCOME TAX?

Anyone who maintains an office or transacts business in Connecticut and who is considered an employer for federal income tax withholding purposes must withhold Connecticut income tax, whether or not the payroll department is located in Connecticut. Also, payers of nonpayroll amounts, gambling winnings and professional athletes and entertainers have special withholding requirements which are described under Nonpayroll Income.

Any employer or payer who is required to withhold Connecticut income tax must register for withholding tax with the State of Connecticut Department of Revenue Services (DRS).

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HOW TO REGISTER FOR WITHHOLDING TAX

EMPLOYERS

Employers who are not already registered with DRS, including employers starting a new business, must register to withhold Connecticut income tax by completing Form REG-1, Application for Tax Registration Number. Form REG-1 is also used to register a business for most other state taxes, including sales and use taxes and corporation business tax.

Employers who are already registered with DRS for other state taxes are still required to register to withhold Connecticut income tax. Complete Form REG-1 to register for withholding as an additional tax.

Employers who acquire an existing business must also complete Form REG-1 to obtain a Connecticut tax registration number. The new owner cannot use the previous owner’s tax registration number or withholding tax coupons.

The DRS tax registration number and federal employer identification number must appear on all Connecticut income tax withholding forms and on all correspondence with DRS. Do not use the registration number issued by the Connecticut Department of Labor on DRS forms.

PAYERS OF NONPAYROLL AMOUNTS

A new payer who is required to deduct and withhold Connecticut income tax from nonpayroll amounts (e.g. pension and annuity and gambling winnings), must complete Form REG-1. See Nonpayroll Income for the requirements to withhold Connecticut tax. The payer may request annual filer status by submitting with Form REG-1 a written request stating that the payer pays only nonpayroll amounts, files federal Form 945, and is not required to file federal Forms 941 quarterly. If all of these requirements are met, the payer will file one Form CT-941, due January 31, reporting annual amounts.

This request must be received on or before March 31st of the calendar year in order to be effective for that calendar year. A new request is not required to be made for succeeding calendar years, as long as the payer remains an annual filer.

Payers of nonpayroll amounts who are already registered to withhold Connecticut income tax may request annual filer status by submitting the written request stating the information listed above to:

State of Connecticut
Department of Revenue Services
Registration Unit
P.O. Box 2937
Hartford, CT 06104-2937

HOUSEHOLD EMPLOYERS

Household employers are not required to withhold Connecticut income tax from the wages of their household employees but may do so voluntarily by agreement between the employer and the employee. Household employers who agree to withhold Connecticut income tax must register with DRS for income tax withholding by submitting, with a completed Form REG-1, a written request stating that they are a household employer and would like annual filer status. See SN 96(8), 1996 Legislative Changes Concerning "Nanny Tax" Withholding.

A household employer already registered to withhold Connecticut income tax may request annual filer status by submitting a written request stating they are a household employer and would like annual filer status. Send the request to:

State of Connecticut
Department of Revenue Services
Registration Unit
P.O. Box 2937
Hartford, CT 06104-2937

This request must be received on or before March 31st of the calendar year in order to be effective for that calendar year. A new request is not required to be made for succeeding calendar years, as long as the household employer remains an annual filer.

Every household employer is required to file federal Form(s) W-2, Wage and Tax Statement, with Form CT-W3, Connecticut Annual Reconciliation of Withholding, whether or not the employer is registered with DRS and whether or not the employer has withheld any Connecticut income tax. Form CT-W3 is due on or before the last day of February, to report Connecticut wages paid in the preceding year. Unregistered household employers should enter the words "HOUSEHOLD EMPLOYER" in the space reserved for the Connecticut tax registration number on Form CT-W3.

AGRICULTURAL EMPLOYERS

An agricultural employer must register by completing Form REG-1, and withhold Connecticut income tax from the wages of agricultural workers if:

  1. the employer is required to withhold federal income tax from the worker's wages (see NOTE below); or
  2. the employer and employee voluntarily agree to have Connecticut income tax withheld.

Agricultural employers may request annual filer status by submitting with a completed Form REG-1, a written request stating that they are an agricultural employer who will file federal Form 943 and who employs farm workers only.

Agricultural employers who are already registered to withhold Connecticut income tax may request annual filer status by submitting a written request stating the information listed above. Send requests to:

State of Connecticut
Department of Revenue Services
Registration Unit
P.O. Box 2937
Hartford, CT 06104-2937

Every agricultural employer is required to file federal Form(s) W-2, with Form CT-W3, whether or not the employer is registered with DRS, and whether or not the employer has withheld any Connecticut income tax. Form CT-W3 is due on or before the last day of February to report Connecticut wages paid in the preceding year. Unregistered agricultural employers should enter the words "AGRICULTURAL EMPLOYER" in the space reserved for the Connecticut tax registration number on Form CT-W3.

NOTE: In general, an agricultural employer is required to withhold federal income tax (and Connecticut income tax) from an agricultural worker receiving cash wages if those cash wages are subject to FICA (social security) tax withholding. Refer to Internal Revenue Service Publication 51, Agricultural Employer Tax Guide, for information on federal income tax withholding for agricultural workers. To obtain a copy of Publication 51, Agricultural Employer Tax Guide, call the IRS at 1-800-829-3676.

PROFESSIONAL ATHLETES AND ENTERTAINERS

Refer to Professional Athletes and Entertainers under What Income is Subject to Connecticut Income Tax Withholding to determine which payers of professional athletes and entertainers must register for Connecticut income tax withholding.

SEASONAL EMPLOYERS

A new employer whose liability for Connecticut income tax withholding will occur seasonally and in the same one or more quarters each year must complete Form REG-1. The employer may request seasonal filer status by submitting with Form REG-1 a written request stating which quarters the employer will be active.

This request must be received on or before the last day of a calendar quarter in order to be effective for that calendar quarter. A new request is not required to be made for succeeding calendar years, as long as the employer remains a seasonal filer.

Seasonal employers who are already registered to withhold Connecticut income tax may request seasonal filer status by submitting a written request, stating the quarters during which their business is active, to:

State of Connecticut
Department of Revenue Services
Registration Unit
P.O. Box 2937
Hartford, CT 06104-2937

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VOLUNTARY REGISTRATION TO WITHHOLD TAX

Any employer who is not required to register to withhold Connecticut income tax may register solely for the purpose of withholding Connecticut income tax for its employees who make an agreement with the employer to have Connecticut income tax withheld.

Upon registration, the employer will be treated as an employer required to withhold Connecticut income tax with respect to his or her employees while the agreement remains in effect.

VOLUNTARY REGISTRATION BY PERSONS OTHER THAN EMPLOYERS TO WITHHOLD TAX

Any person (other than an employer) who is not required to register to withhold Connecticut income tax may register solely for the purpose of withholding Connecticut income tax if both the payer and the payee voluntarily agree to have Connecticut income tax withheld.

Upon registration the payer will be treated as an employer required to withhold Connecticut income tax with respect to his or her payees while the agreement remains in effect.

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WHAT INCOME IS SUBJECT TO CONNECTICUT INCOME TAX WITHHOLDING?

In general, Connecticut follows the federal rules for determining income subject to income tax withholding. Employers should consult the Internal Revenue Service Circular E, Employer’s Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide, to determine federal income tax withholding rules for specific types of income.

WAGES

In general, all amounts determined to be wages and subject to federal income tax withholding are also wages for Connecticut income tax withholding purposes. Such amounts include, but are not limited to, fringe benefits, supplemental compensation, golden parachutes, sick pay, moving expenses and severance pay.

Example 1: A Connecticut resident is employed in State X by an employer maintaining an office or transacting business both in Connecticut and in State X. The State X income tax payable on the employee’s wages is $100. The Connecticut income tax that would otherwise be required to be withheld from such wages is $160. The amount of Connecticut income tax to be deducted and withheld is $60. Example 2: A Connecticut resident works in State Y for an employer maintaining an office or transacting business both in Connecticut and in State Y. The State Y income tax payable on the employee’s wages is $200. The Connecticut income tax that would otherwise be required to be withheld from such wages is $200. No Connecticut income tax is to be deducted and withheld. Example 3: A Connecticut resident works in State Z for an employer maintaining an office or transacting business both in Connecticut and in State Z. The State Z income tax payable on the employee's wages is $300. The Connecticut income tax that would otherwise be required to be withheld from such wages is $250. No Connecticut income tax is to be deducted and withheld.
Example 1: Working solely within Connecticut: A resident of State X works in Connecticut for an employer that is doing business in Connecticut and in State X. The employer must withhold Connecticut income tax because the services are performed in Connecticut. The employer should contact the other state to determine to what extent it may be required to withhold income tax for State X. Example 2: Working solely outside Connecticut: A resident of State Y works in State Y for an employer whose main office, including the payroll department, is located in Connecticut. The employer will not withhold Connecticut income tax even though payment is made from a point in Connecticut, since the employee is a nonresident and performs all his services outside Connecticut. The employer should contact State Y for withholding requirements in that state. Example 3: Working partly within and partly outside Connecticut: A resident of State Z works partly in Connecticut and partly in State Z for an employer who is doing business in Connecticut and State Z. The employer must withhold Connecticut income tax on wages to the nonresident employee in the same proportion that the employee’s wages derived from or connected with sources within Connecticut relate to the employee’s total wages. See Determining How Much to Withhold From Nonresident Employees Who Work Partly Within and Partly Outside Connecticut.

NONPAYROLL INCOME

Certain nonpayroll income (also known as nonpayroll amounts, as described in 26 C.F.R. §31.6011(a)-4(b)) is subject to withholding.

  1. in a case in which no previous request is in effect, three calendar months after the date the request is furnished to the payer; or
  2. in a case in which a previous request is in effect, the first status determination date (January 1, May 1, July 1 and October 1 of each year) which occurs at least 30 days after the date the request is furnished to the payer.

A Form CT-W4P remains in effect until terminated by the payee. The payee may terminate the request by furnishing the payer with a signed written notice of termination.

Any payer who receives a request to withhold Connecticut income tax must register by filing a Form REG-1. (See How To Register For Withholding Tax.) In general, the payer will follow the instructions in the section entitled How To Report and Remit Taxes Withheld, except as follows:

  1. Information Return: Federal Form 1099-R, showing the amount of Connecticut income tax withheld in the prior year, must be given by payers of pension and annuity plans to their recipients on or before the succeeding January 31.
  2. Annual Reconciliation: Form CT-1096 is due from all payers who are required to be registered for Connecticut income tax withholding on the last day of February even if no Connecticut income tax was withheld. No payment is to be made with this form. Payers must file the "state copy" of federal Form 1099-R, only if Connecticut income tax was withheld.
  1. Statement for Gambling Winnings: Federal Form W-2G, showing the amount of Connecticut income tax withheld in the prior year, must be given by payers of gambling winnings to their recipients on or before the succeeding January 31.
  2. Annual Reconciliation: Form CT-1096, is due from all payers of gambling winnings on or before the last day of February. No payment is to be made with this form. Payers must file every "state copy" of federal Form W-2G, for winnings paid to resident individuals, even if no Connecticut income tax was withheld.

PROFESSIONAL ATHLETES AND ENTERTAINERS

Compensation for personal services performed in Connecticut by a professional athlete or entertainer, paid in cash or otherwise, in connection with sporting events or in connection with the preparation or presentation of entertainment, whether as a participant, performer or otherwise, is subject to Connecticut income tax withholding. The person making payment to the athlete or entertainer, or to the athlete or entertainer’s agent for rendering such services, is the employer.

A person whose services are covered under this section is treated as an employee for Connecticut income tax purposes, whether or not such person is considered an employee for federal withholding tax purposes.

For further information on withholding for professional athletes and entertainers refer to PS 96(1), Income Tax Withholding for Athletes and Entertainers.

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WHAT PAYMENTS ARE NOT SUBJECT TO CONNECTICUT INCOME TAX WITHHOLDING?

In general, income which is not subject to federal income tax withholding is not subject to Connecticut income tax withholding.

PAYMENTS NOT SUBJECT TO FEDERAL INCOME TAX WITHHOLDING

Other than the exceptions noted in the previous section, Connecticut income tax withholding is not required on any compensation paid to an employee if the compensation is not subject to federal income tax withholding. Employers should consult the Internal Revenue Service Circular E, Employer’s Tax Guide, to determine federal income tax withholding rules for specific types of income.

SELF-EMPLOYED INDIVIDUALS

The owner of a business that has no employees is not required to register for Connecticut income tax withholding. The owner of a business, other than the sole shareholder of an S corporation, is not considered an employee for federal or Connecticut income tax withholding purposes.

Exemption from Connecticut income tax withholding does not exempt the income from Connecticut income tax. The recipient of taxable income that is not subject to Connecticut income tax withholding is required to pay estimated taxes if the recipient’s Connecticut taxable income meets the minimum filing requirement. For further information, refer to IP 92(5.7), Estimated Connecticut Income Taxes.

Example: Mary owns her own business. The income she earns is not subject to Connecticut income tax withholding. Generally, if she will owe more than $500 in Connecticut income tax for the current year (over and above any Connecticut income tax withheld for the current year), she must make estimated Connecticut income tax payments.

INTERSTATE COMMERCE

Compensation paid by interstate rail carriers, interstate motor carriers and interstate motor private carriers to a nonresident employee who perform regularly assigned duties in two or more states is not subject to Connecticut income tax withholding. The compensation does not constitute income derived from Connecticut sources even though the employee performed services in Connecticut. However, such compensation constitutes income derived from sources within the employee’s state of residence.

INTERSTATE AIR CARRIERS

Compensation paid by an interstate air carrier to a nonresident employee who performs regularly assigned duties on an aircraft in two or more states constitutes income derived from sources within the employee’s state of residence, and in the state in which the employee earns more than 50% of such compensation. An employee is deemed to have earned more than 50% of his or her compensation in Connecticut when the employee’s scheduled flight time in Connecticut is more than 50% of the employee’s total scheduled flight time in the calendar year. If this is the case, refer to Nonresident Wages Subject to Connecticut Income Tax Withholding.

NONRESIDENT SEAMAN

A nonresident seaman’s wages attributable to employment on a ship which enters a Connecticut port for the purpose of foreign or interstate trade is not subject to Connecticut income tax withholding.

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WAGES PAID BY THE UNITED STATES TO MEMBERS OF THE ARMED FORCES

Payments made by the United States to nonresident military personnel stationed or performing services for the United States armed forces in Connecticut are not subject to Connecticut income tax withholding. In general, payments made by the United States to military personnel who are Connecticut residents or whose domicile was Connecticut when they entered the military, regardless of where they are stationed, are subject to Connecticut income tax withholding. Certain individuals, however, may be entitled to claim exemption from the tax. IP 92(2.4), Connecticut Income Tax Information for Military Personnel and Veterans, lists the criteria which must be met in order to claim exemption from withholding.

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WITHHOLDING FOR MILITARY RETIREES

Connecticut residents who are retired from the regular and reserve components of the Uniformed Services are allowed to request, in writing, that the Uniformed Services withhold Connecticut income tax from their monthly retired pay. The term Uniformed Services refers to the Army, Navy, Air Force, Marine Corps, Coast Guard, commissioned corps of the Public Health Service, and commissioned corps of the National Oceanic and Atmospheric Administration.

A member may request withholding by completing Form CT-W4P and submitting it to the retired pay office of his or her Uniformed Service. The amount to be withheld from each payment must be an even dollar amount but not less than $10.


HOW TO WITHHOLD CONNECTICUT INCOME TAX

Withholding is determined using the current Connecticut Income Tax Withholding Tables and Calculation Rules. To determine how much Connecticut income tax to withhold from each employee’s wages, employers should refer to the most recently completed Form CT-W4 on file for each employee.

EMPLOYEE'S WITHHOLDING OR EXEMPTION CERTIFICATE

Employers must obtain a completed copy of Form CT-W4 from each new employee when hired. The form takes effect as of the first payroll period ending or the first payment of wages made on or after the date Form CT-W4 is furnished by the employee. Unless the employee claims exemption, Form CT-W4 remains in effect until the employee provides the employer with a new one.

Photocopy Form CT-W4 as needed.

  1. the employee is employed by the employer on the last day of the quarter; and
  2. the employer reasonably expects that:
  1. in the case of an employee filing as an unmarried individual or married individual filing separately, his or her annual wages will exceed $36,000; or
  2. in the case of an employee filing as head of household, his or her annual wages will exceed $57,000; or
  3. in the case of an employee filing a joint return, his or her annual wages will exceed $72,000.

Forms CT-W4 meeting the above conditions and received during the quarter must be sent to DRS with Form CT-941, Connecticut Quarterly Reconciliation of Withholding.

DETERMINING HOW MUCH TO WITHHOLD FROM EMPLOYEES

The amount of income tax to be withheld from an employee’s wages depends on: (1) payroll period, (2) gross taxable wages, (3) filing status and (4) additions or reductions to withholding requested by the employee on Form CT-W4.

HOW TO USE THE WITHHOLDING TABLES

Use these steps when calculating withholding from the Withholding Tables:

  1. Select the table which is the same as your payroll period (weekly, monthly, etc.).
  2. Use the columns on the left side of the table. Find the line on which your employee’s gross taxable wages are included. (Gross taxable wages are wages subject to federal income tax withholding.)
  3. Select the "Withholding Amount" column on the right side of the table which corresponds with the filing status selected by your employee on Form CT-W4 (Status A, B, C, D).
  4. Add to the "Withholding Amount" the amount, if any, on Line 2 of Form CT-W4.
  5. Subtract from the "Withholding Amount" the amount, if any, on Line 3 of Form CT-W4. The amount on Line 3 of Form CT-W4 cannot exceed the total withholding amount.

WITHHOLDING FOR DAILY/MISCELLANEOUS AMOUNTS

For those employees who receive one-time or miscellaneous payments, the employer must withhold at a flat rate of 4.5% (.045) without allowance for exemption. For withholding rules on supplemental compensation. See Supplemental Compensation.

DETERMINING HOW MUCH TO WITHHOLD FROM NONRESIDENT EMPLOYEES WHO WORK PARTLY WITHIN AND PARTLY OUTSIDE CONNECTICUT

A nonresident employee who performs services partly within and partly outside Connecticut is subject to Connecticut income tax only on the portion of wages attributable to services performed within Connecticut.

For Connecticut income tax withholding purposes, however, an employer must withhold Connecticut income tax on all wages paid to the employee unless the employer can properly allocate the wages attributable to services performed in Connecticut by means of one of the following:

Employers who receive Form CT-W4NA or who maintain accurate current records from nonresident employees will calculate the amount of Connecticut income tax to be withheld for services performed within Connecticut as follows:

  1. Determine the total "Withholding Amount" on all wages paid to the employee using the procedure in Determining How Much to Withhold from Employees.
  2. Multiply that total "Withholding Amount" by the percentage from Form CT-W4NA that certifies the estimated portion of services performed in Connecticut during the year (when the employer has a completed Form CT-W4NA on file) or by the percentage representing wages paid for such services performed within Connecticut, divided by the nonresident’s total wages (when the employer maintains accurate and current records).

The following examples refer to the Withholding Tables, Effective July 1, 1998.

Example 1: Form CT-W4NA: A nonresident employee performs services partly within and partly outside Connecticut. The employee’s taxable wages are $900 per week. The employee’s Form CT-W4 indicates filing status "A" and Form CT-W4NA, filed by the employee, shows 60% as the estimated portion of services performed within Connecticut. Because 60% of the employee’s work time was performed in Connecticut, the employer will withhold 60% of the Connecticut income tax that would have been due if all wages were earned in Connecticut. ($33.79 x .60 = $20.27, the amount of Connecticut income tax to be withheld.) Example 2: Employer Maintains Records: A nonresident employee performs services partly within and partly outside Connecticut. The employee’s taxable wage is $1000 per week. The employee’s Form CT-W4 indicates filing status "A." The employee did not complete Form CT-W4NA, but the employer does maintain accurate current records showing that in week 1, the employee worked 2 out of 5 days (40%) in Connecticut. In week 2, the employee worked 100% of the time in Connecticut. If all work was performed in Connecticut, the employer would withhold $41.05; therefore, for week 1 the employer will withhold $16.42 ($41.05 x .40) and for week 2 the employer will withhold $41.05. Example 3: No Method of Allocation: An employer has not received a Form CT-W4NA from a nonresident employee who performs services partly within and partly outside Connecticut and the employer does not keep accurate current records for the amount of wages paid to the nonresident for services performed within Connecticut. The employee’s taxable wages are $2300 biweekly and his filing status shown on his Form CT-W4 is "B." The employer will withhold $84.36 of Connecticut income tax from the nonresident’s wages, the same amount that would be withheld if all services were performed in Connecticut.

Photocopy Form CT-W4NA as needed.

SUPPLEMENTAL COMPENSATION

Withholding rules for supplemental compensation (such as bonuses, commissions, overtime pay, sales awards, etc.) depend on when the supplemental compensation is paid.

Example: Mary worked 5 hours overtime during the pay period. In her paycheck, Mary’s employer includes her regular pay and her overtime pay. Her employer will determine the amount to be withheld based upon the total of the regular pay plus the overtime.
  1. No withholding on regular wages: If the employer did not withhold income tax from the regular wages, the regular and supplemental wages should be added together and the tax computed on the whole amount.
  2. Withholding on regular wages: If the employer did withhold income tax from the employee’s regular wages, the employer must compute the tax on the combined regular and supplemental wages. The computed tax minus the tax withheld from regular wages is the tax to be withheld from supplemental wages.
Example: An employer pays her employees annual bonuses. The bonuses are not included in the employees’ regular paychecks but income tax is withheld from the regular pay. The employer must add the bonus to the gross wages for the last regular pay period, determine the withholding tax on the total of the bonus plus the gross wages, subtract the tax already withheld from the regular wages and withhold the difference from the bonus check.

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HOW TO REPORT AND REMIT TAXES WITHHELD

Employers and payers who are registered with DRS for Connecticut income tax withholding will receive the Employer’s Withholding Remittance Coupon Book containing the reporting forms. Each of the forms included in the coupon book is a machine readable document which is personalized with the employer’s name, address, Connecticut tax registration number and federal employer identification number. Only the original coupon should be submitted.

WITHHOLDING PAYMENT COUPON

Form CT-WH, Connecticut Withholding Tax Payment, is to be mailed to DRS with each Connecticut income tax withholding payment. Due dates for payment of Connecticut income tax withholding for wage and nonpayroll amounts are the same as the due dates for the employer’s deposits of federal income tax withholding. Do not file Form CT-WH if no payment is due.

However, if an employer chooses to deposit withheld federal income tax more frequently than is required under federal law, the employer must also pay withheld Connecticut income tax at the same time.

If the tax liability was deducted and withheld during one quarter and paid over in another quarter, enter the number for the quarter in which the tax liability was deducted and withheld. For example, if the tax liability was deducted and withheld in March and paid over in April, enter "1" on Line 1 of Form CT-WH.

QUARTERLY RECONCILIATION

All employers and payers (except seasonal, annual, agricultural and household employer filers) who are registered for Connecticut income tax withholding must file Form CT-941, even if no tax is due or has been withheld for that quarter. Due dates are: First Quarter, April 30; Second Quarter, July 31; Third Quarter, October 31; Fourth Quarter, January 31. This requirement applies to all employers and payers even if they are not required to file a quarterly reconciliation for federal income tax withholding purposes. Form CT-941 is located in the back of the Employer's Withholding Remittance Coupon Book.

An employer that makes timely withholding payments and owes no additional withholding for the quarter has 10 days after the normal due date to file Form CT-941.

AMENDED QUARTERLY RECONCILIATION

If an error was made by the employer on a previously filed Form CT-941, an amended return must be filed. Use Form CT-941X, Amended Connecticut Quarterly Reconciliation of Withholding, to amend a Form CT-941 for any calendar quarter ending on or after December 31, 1995. Use Form CT-941X(B) to amend a Form CT-941 for any calendar quarter ending on or before September 30, 1995.

WAGE AND TAX STATEMENT

Federal Form W-2, Wage and Tax Statement, showing the correct amount of Connecticut wages paid by the employer to the employee and the correct amount of Connecticut income tax withheld in the calendar year, must be given by employers to their employees on or before January 31.

Complete the state information in boxes 16, 17 and 18 of federal form W-2 for the calendar year. In box 16 enter CT, the two letter state code for Connecticut and the Connecticut tax registration number from the Employers Withholding Remittance Coupon book. Enter in box 17 the total wages paid to a Connecticut resident or the wages attributable to services performed in Connecticut of a nonresident. Enter in box 18 the total Connecticut income tax withheld.

ANNUAL RECONCILIATION

Form CT-W3, is due from all employers on or before the last day of February. No payment is to be made with this form. Employers must file every "state copy" of federal Form W-2 (copy 1 of the optional six-part federal Form W-2 or equivalent) reporting Connecticut wages paid during the calendar year with the annual reconciliation, even if no Connecticut income tax was withheld.

Form CT-1096, is due on or before the last day of February. No payment is to be made with this form.

If you are required to file federal Form 1096, you must file a Form CT-1096 with every "state copy" of the following:

  1. federal Form W-2G, for winnings paid to resident individuals, even if no Connecticut income tax was withheld;
  2. federal Form 1099-MISC, for payments made to resident individuals or, if the payments relate to services performed wholly or partly in Connecticut, payments to nonresident individuals, even if no Connecticut income tax was withheld;
  3. federal Form 1099-R, only if Connecticut income tax was withheld;
  4. federal Form 1099-S, reporting real estate transactions in Connecticut.

AMENDED ANNUAL RECONCILIATIONS

If an error was made by the employer or payer of a previously filed Form CT-W3 or Form CT-1096, respectively, an amended return must be filed. Employers and payers should write "Amended" at the top of Form CT-W3 or Form CT-1096 for the appropriate year, and attach any "state copy" of federal Form W-2C or corrected federal Forms 1099-MISC, 1099-R, 1099-S or W2-G.

CORRECTIONS TO YOUR MAGNETIC MEDIA OR W-2 INFORMATION RETURNS

DRS does not accept magnetic filing of federal Form W-2C. If there is an error in your magnetic media or Form W-2 information returns, correct the file and replace the entire file. Complete Form CT-6559, Transmitter Report, and check the box indicating that it is a replacement file. Also file an amended Form CT-W3 or Form CT-1096 and write "Amended" at the top of the form.

CORRECTION/REORDER FORM

Form CTC, Withholding Correction/Reorder Form, allows employers to make corrections to taxpayer identification information preprinted in the coupon book or to order an additional coupon book for the current calendar year. Please allow a minimum of four weeks when ordering additional coupon books.

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PAYMENT BY ELECTRONIC FUNDS TRANSFER

Taxpayers whose 12-month liability for a particular tax exceeded $100,000 must pay that tax for the next 12-month period by electronic funds transfer.

DRS will issue a notice to payers who are required to pay by electronic funds transfer.

Although the Department reviews annually whether a taxpayer must continue to pay withholding tax by electronic funds transfer, any taxpayer that has previously been issued notice to pay withholding tax by electronic funds transfer must continue to pay by electronic funds transfer until the Department issues notice to such taxpayer that payment by electronic funds transfer by the taxpayer is no longer required. (See SN 96(5), 1996 Legislative Changes Affecting Payment of Connecticut Taxes by Electronic Funds Transfer, and IP 93(2.1), Q & A on Paying Taxes By Electronic Funds Transfer.) For further information on payment by electronic funds transfer, call 860-297-4973.

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EMPLOYER’S LIABILITY FOR TAXES WITHHELD

An employer is liable for the amount of the Connecticut income tax which the employer is required to withhold. For purposes of assessment and collection, amounts required to be withheld and paid over to DRS (and any penalties and interest) are considered to be the liability of the employer (as withholding agent) under the law. The employer remains liable even if a third party is withholding on the employer’s behalf.

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PENALTIES AND INTEREST

Employers who fail to comply with the requirements to withhold Connecticut income tax are subject to penalties, including:

LATE PAYMENT

The penalty for late payment or underpayment of the tax due is 10% (.10) of such amount due on all returns including Form CT-WH.

LATE FILING PENALTY

If no tax is due, the penalty for late filing of a return is $50. (This late filing penalty does not apply to Form CT-WH.)

INTEREST

If you are filing a late or amended return, interest is computed at the rate of 1% (.01) per month or fraction thereof from the due date until the date of payment. Interest is based on the amount which should have been remitted on time.

REQUIRED INFORMATIONAL RETURNS

A penalty of $5 per statement (up to a total of $2,000 per calendar year) is imposed for failure to provide federal Form W-2 and required Forms 1099-MISC, 1099-R, 1099-S and W-2G to each employee or payee and a copy thereof to DRS (unless due to reasonable cause).

WILLFUL EVASION

A penalty equal to the total amount of the tax evaded, not collected or not paid over is imposed on any responsible person for the willful failure of an employer to collect or truthfully account for income tax, or for willfully attempting to evade the tax.

FRAUD

In addition to any other penalty that may be imposed, a civil penalty of not more than $1,000 is imposed where, with fraudulent intent, an employer fails to pay, deduct or withhold and pay tax, or to make or sign any return or supply information.

CRIMINAL PENALTIES

Any person who willfully fails to pay tax, file a return, keep records, or supply information is guilty of a misdemeanor. A person who willfully files with DRS any document known to be fraudulent or false in any material manner is guilty of a felony.

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HOW TO ADVISE EMPLOYEES TO HAVE ENOUGH TAX WITHHELD

Remind employees to check their withholding. If an employee will owe more than $500 in Connecticut income tax over and above what has been withheld, he or she may be required to make estimated income tax payments and may be liable for an addition to tax. Advise employees to check their Connecticut income tax withholding by using IP 92(9.5), Is My Connecticut Withholding Correct?, which may be obtained from the DRS Forms Unit.

Two-earner couples may also refer to the Supplemental Table of Form CT-W4.

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WHAT RECORDS TO KEEP

An employer must maintain a current accurate record of all persons from whom tax is withheld. DRS has the authority to inspect an employer’s records at any time. Records should contain all applicable information listed below:

Records should be kept for at least four years after the date the tax becomes due or the date the tax is paid, whichever is later. However, a current, accurate copy of Form CT-W4, Form CT-W4NA or Form CT-W4P must be on file at all times.

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HOW TO CANCEL REGISTRATION FOR WITHHOLDING CONNECTICUT INCOME TAX

If an employer goes out of business or permanently stops paying wages, the employer should notify DRS immediately by filing Form CT-941 for the current quarter. Check the box indicating that the employer no longer has employees and enter the last payroll date on the line provided on Form CT-941 or send written notification to:

State of Connecticut
Department of Revenue Services
Registration Unit
P.O. Box 2937
Hartford, CT 06104-2937

Comply with all filing requirements for the calendar year as explained in How To Report and Remit Taxes Withheld.


EFFECT OF THIS DOCUMENT

An Informational Publication is a document that addresses issues frequently raised by taxpayers, usually in a question-and-answer format. It is less technical in nature than a Policy Statement, but may be referred to by individual taxpayers for guidance.

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Frequently Asked Withholding Questions

1. DOES THE CONNECTICUT CIRCULAR CT BOOKLET CONTAIN ALL THE INFORMATION I NEED TO WITHHOLD CONNECTICUT INCOME TAX FROM MY EMPLOYEES OR PAYEES? Yes. The instructions, withholding tables and calculation rules are all included in IP 92(8.4), Connecticut Circular CT - Employer's Tax Guide.
2. WILL I RECEIVE A CONNECTICUT CIRCULAR CT EACH CALENDAR YEAR? No. IP 92(8.4), Connecticut Circular CT - Employer's Tax Guide is no longer issued each calendar year. Continue to use IP 92(8.4) until a new version is issued.
3. WILL THE DRS MAIL A QUARTERLY RECONCILIATION TO EMPLOYERS JUST LIKE THE IRS DOES? No. Form CT-941, Connecticut Quarterly Reconciliation of Withholding, is located in the Employer’s Withholding Remittance Coupon Book. Form CT-941 is preprinted with the number of the quarter and due dates. Employers should be certain to use the correct form.
4. MY EMPLOYEES OFTEN ASK ME FOR ASSISTANCE IN CALCULATING THE AMOUNT THEY SHOULD HAVE WITHHELD FROM THEIR PAYCHECKS. DOES THE DEPARTMENT OF REVENUE SERVICES PUBLISH ANY INFORMATION THAT I CAN DISTRIBUTE TO THEM? Yes. IP 92(9.5), Is My Connecticut Withholding Correct?, is designed to help individuals decide if they are having enough tax withheld. A copy of that publication is available from the DRS Forms Unit.
5. WHAT IS THE DIFFERENCE BETWEEN GROSS CONNECTICUT WAGES AND GROSS WAGES? Gross wages means the sum of wages paid to all your employees regardless of where they work. The amount of gross wages you report on Form CT-941 for a calendar quarter must correspond with the amount reported on federal Form 941 for that quarter. Gross Connecticut wages means the sum of all wages paid to resident employees, regardless of where their services are performed, and all wages paid to nonresident employees for services performed in Connecticut.
6. WHAT SHOULD BE SUBMITTED TO THE DEPARTMENT OF REVENUE SERVICES WITH FORM CT-W3, CONNECTICUT ANNUAL RECONCILIATION OF WITHHOLDING? Every "state copy" of federal Form W-2, whether or not Connecticut income tax was withheld.
7. DO I HAVE TO FILE FORM CT-1096 WHICH IS INCLUDED IN MY 1998 EMPLOYER’S REMITTANCE COUPON BOOK? Only payers who are required to file federal Form 1096 must file Form CT-1096 with every "state copy" of the following:
  • federal Form W-2G, for winnings paid to resident individuals, even if no Connecticut income tax was withheld.
  • federal Form 1099-MISC, for payments made to resident individuals or, if the payments relate to services performed wholly or partly in Connecticut, payments to nonresident individuals, even if no Connecticut income tax was withheld.
  • federal Form 1099-R, only if Connecticut income tax was withheld.
  • federal Form 1099-S, reporting real estate transactions in Connecticut.
8. IF I FILE FEDERAL FORM 1096 AND I AM NOT REGISTERED WITH CONNECTICUT DRS FOR WITHHOLDING BECAUSE I AM NOT REQUIRED TO BE REGISTERED, AM I REQUIRED TO FILE FORM CT-1096? Yes, but only if you file any of the forms as described in the answer to Question 7. (Enter "information only" in the space provided for the Connecticut Tax Registration Number.) You may obtain Form CT-1096 from the DRS Forms Unit.

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COMPARISON OF FEDERAL AND CONNECTICUT FILING RULES
(for most commonly filed withholding forms)

 
C o n n e c t i c u t
F e d e r a l


Wage Amounts

EMPLOYERS HIRING NEW EMPLOYEES Complete Form CT-W4 for each employee. Mail or fax a copy of Form CT-W4 for each new employee to the Department of Labor. Complete federal Form W-4 for each employee.
WITHHOLDING PAYMENTS Mail payment with Form CT-WH on the same due dates as your federal deposits are required.

NOTE: Do not use Form CT-WH when:
  1. No payment is due. (No coupon is due.)
  2. If Connecticut income tax withholding is less than $500 in a calendar quarter. (Mail payment with Form CT-941.)
Payments are deposited as required by federal law.
QUARTERLY RECONCILIATION File one Form CT-941 combining both wage and nonpayroll items. Form CT-941 is located in the back section of the Employer's Withholding Remittance Coupon Book. The IRS mails federal Form 941 quarterly.
ANNUAL RECONCILIATION File Form CT-W3 with every "state copy" of federal Form W-2. Form CT-W3 is located in the back section of the Employer's Withholding Remittance Coupon Book. File federal Form W-3 with federal Forms W-2.


Nonpayroll Amounts

WITHHOLDING PAYMENTS Combine wage and nonpayroll withholding amounts on one Form CT-WH if the due dates are the same and mail to DRS. Deposit in separate transaction from payroll withholding.
QUARTERLY RECONCILIATION File one Form CT-941 combining both wage and nonpayroll items. Not applicable.
ANNUAL RECONCILIATION If you are required to file federal Form 1096, file Form CT-1096 with every "state copy" of federal forms listed under ANNUAL RECONCILIATION. File federal Form 945 and federal Form 1096.

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Withholding Calculation Rules
Effective July 1, 1998

EMPLOYERS: Use either the withholding calculation rules or the withholding tables to determine the amount of tax to be withheld from the wages of employees. There is no percentage method available for determining Connecticut income tax withholding.

The following steps will determine the amount of Connecticut income tax to be withheld form an employee's pay.

STEP ACTION

1.

Determine the employee's wage per pay period.

2.

Determine the number of pay periods in a year (e.g., 52, 26, 24, 12).

3.

Determine annualized salary (Multiply Step 1 by Step 2).

4.

Determine employee's filing status (Line 1 from Form CT-W4) (e.g., A, B, C or D).

5.

Using annualized salary (Step 3) and filing status (Step 4), determine exemption amount from Table A - Exemptions.

NOTE: The personal exemption is reduced in increments of $1,000. An employee with filing status "A" and an annualized salary of $25,125 receives a $10,000 exemption, not a $10,875 exemption.

6.

Determine annualized taxable income (Subtract Step 5 from Step 3).

NOTE: If annualized taxable income (Step 6) is equal to or less than zero, the initial withholding amount should equal zero. Proceed to Step 11.

7.

Determine initial withholding amount from table below:
FILING STATUS: A or D

If the amount from Step 6 is less than or equal to $10,000:
multiply the amount from Step 6 by .03.

If the amount from Step 6 is greater than $10,000:
multiply .045 by the excess over $10,000 and add $300.00.

FILING STATUS: B

If the amount from Step 6 is less than or equal to $16,000:
multiply the amount from Step 6 by .03.

If the amount from Step 6 is greater than $16,000:
multiply .045 by the excess over $16,000 and add $480.00.

FILING STATUS: C

If the amount from Step 6 is less than or equal to $20,000:
multiply the amount from Step 6 by .03.

If the amount from Step 6 is greater than $20,000:
multiply .045 by the excess over $20,000 and add $600.00.

For example:
If the amount from Step 6 is $10,000 and the filing status is "A", the initial withholding amount equals $300.00 ($10,000 x .03 = $300.00).

If the amount from Step 6 is $15,710 and the filing status is "A", the initial withholding amount equals $556.95 ($15,710 - $10,000 = $5,710 / $5,710 x .045 = $256.95 / $256.95 + $300.00 = $556.95).

8.

Using annualized salary (Step 3) and filing status (Step 4), determine credit percentage from Table B - Personal Tax Credits.

9.

Multiply initial withholding amount (Step 7) by (1.00 minus the credit percentage) (e.g., 1.00 - .14 = .86).

10.

Determine withholding amount per pay period (Divide Step 9 by Step 2).

11.

Determine additional withholding amount per pay period (Line 2 from Form CT-W4).

12.

Determine reduced withholding amount per pay period (Line 3 from Form CT-W4).

13.

Determine total withholding amount per pay period (Add Step 10 and Step 11) or (Subtract Step 12 from Step 10).

NOTE: Refer to the withholding rules for supplemental compensation (such as bonuses, commissions, overtime pay, sales awards, etc.). Also refer to Withholding Rules for Daily /Miscellaneous Amounts.

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Withholding Tax Tables

Weekly

Bi-Weekly

Semi-Monthly

Monthly


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