NEW RETIREMENT INCOME WITHHOLDING
Under new legislation enacted during the regular 2017 session of the Connecticut General Assembly, Connecticut resident taxpayers receiving pension and other retirement income distributions must have taxes withheld. This is not a new tax. Previously, many taxpayers would fail to realize or adequately anticipate that taxes are due on the income and ended up suddenly facing a larger than anticipated tax bill at filing time.
Connecticut resident taxpayers must provide income withholding directions (Form CT-W4P) to any entity administering the retirement payments or risk withholding at the highest rate of 6.99%. Based on state income tax filing status and the applicable withholding code, income from regularly received payments will be withheld accordingly. Taxpayers anticipating significant other income may request additional withholding and taxpayers anticipating too much other income withholding (usually married joint filers) may request reduced withholding on the retirement payments.
Said Department of Revenue Services (DRS) Commissioner Kevin Sullivan, “This new legislation was enacted months ago and DRS published guidance back in October. Still, it’s clear that this is catching taxpayers by surprise and that is never good.”
“Therefore,” added Commissioner Sullivan, “DRS is updating its taxpayer assistance information on-line at www.ct.gov/DRS and will also help taxpayers and plan administrators who call the agency at (860) 297-5962. In addition, while expecting good faith compliance by plan administrators and taxpayers during this first year of implementation, we will be more than understanding with respect to those who just have not had timely and clear information to get it right for 2018.”