Withholding Rules For Connecticut Employers
PURPOSE: The purpose of this Announcement is to inform employers that a new Connecticut Circular CT will not be mailed for 1996 and to alert household employers of new filing rules.
USING THE 1995 CONNECTICUT CIRCULAR CT FOR 1996 WITHHOLDING: Because Connecticut withholding requirements are essentially unchanged, the Department has decided to control costs by not issuing a new Connecticut Circular CT for 1996.
All Connecticut employers should continue to use their 1995 Connecticut Circular CT until further notice. The 1995 Connecticut Circular CT remains in effect until DRS issues a new Circular. Any changes for the 1996 taxable year are listed below.
Withholding Tables, Calculation Rules and Forms: The 1995 withholding tables and calculation rules must be used until June 30, 1996. (Refer to the 1995 Connecticut Circular CT, Pages 37-46.) Effective July 1, 1996, withholding tables and calculation rules will change to reflect the lower income tax rates enacted by 1995 Conn. Pub. Acts 160, §68. Continue to use 1995 Forms CT-W4, Employees Withholding or Exemption Certificate; CT-W4NA, Employees Withholding or Exemption Certificate Nonresident Apportionment; CT-W4P, Withholding Certificate for Pension or Annuity Payments. Continue to use IP 92(9.2), Is My Connecticut Withholding Correct?, for further guidance during this time. Updated withholding tables, calculation rules and copies of the forms listed above will be mailed to you by June 1996.
The instructions for Form CT-WH now inform you not to mail Form CT-WH if no payment is due.
Interest Rates: The interest rate is now 1% per month or fraction thereof for taxes due and owing on or after July 1, 1995.
THE "NANNY TAX"--WITHHOLDING FOR HOUSEHOLD EMPLOYEES: Income tax withholding for household employees continues to be required only if the household employer and the household employee agree. However, because of the adoption of the Social Security Domestic Employment Reform Act of 1994, Pub. L. No. 103-387, 108 Stat. 4071, (also see Notice 95-18, 1995-17 I.R.B. 13), household employers who choose to withhold income tax for their household employees and who withhold $500 or more per calendar quarter may now request annual filer status. If the request is granted they may file only one Form CT-941 for household employees, which is due with income tax withheld by the same date that the employer's individual Connecticut income tax return is due. Household employers who withhold less than $500 per calendar quarter must continue to file Form CT-941 and pay over income tax withheld on or before the last day of the month next succeeding the calendar quarter for which the taxes were deducted and withheld. The Department intends to introduce legislation that would allow such household employers also to file annually.
Household employees, also referred to as "domestic service workers," work in or around a private home for the person by whom they are employed (the "household employer") or in and around the club rooms or house of a local college club or local chapter of a fraternity or sorority. Examples of household employees include nannies, cooks, maids, babysitters, gardeners, and handymen.
Household employers who qualify (see above) may request annual filer status by submitting Form REG-1, Application for Tax Registration Number, with a written request stating that the employer is a household employer who has agreed to withhold income tax on behalf of household employees. Persons who employ both household and non-household employees will be assigned separate registration numbers for household employee withholding and non-household employee withholding. Household employers who are already registered to withhold income tax for household employees only must submit only the written request to file annually. Upon registration, the employer will be treated as an employer required to register with respect to his or her household employees while the agreement remains in effect. Persons who employ both household and non-household employees and who request annual filer status should submit a Form CT-941 (covering non-household employees) by January 31, as usual, and submit a second Form CT-941, which the Department will provide, (covering household employees) by April 15.
Requests for annual filer status for the 1995 calendar year must be received by November 30, 1995. After 1995, this request must be received on or before March 31 in order to be effective for the current calendar year. As long as the employer remains an annual filer, no new request need be made for succeeding calendar years. Form REG-1 and the request for annual filer status should be sent to: Registration Unit, Department of Revenue Services, P.O. Box 2937, Hartford, CT 06104-2937.
Regardless of annual filer status, employers of household employees are still required to give the appropriate copies of federal Form W-2, Wage and Tax Statement, to each employee by January 31 of the following year, and to file, by the last day of February, Form CT-W3, Connecticut Annual Reconciliation of Wages, together with all state copies of federal Form W-2 reporting Connecticut wages paid to employees during the prior calendar year.
1996 CALENDAR OF EMPLOYER'S DUTIES
Each time a deposit of federal income tax is made:
Mail a deposit of Connecticut withholding tax with Form CT-WH, Connecticut Withholding Tax Payment, to: Department of Revenue Services, P.O. Box 5055, Hartford, CT 06102-5055.
Your payment will be considered timely if the U.S. Post Office cancellation date is on or before the due date of the federal income tax withholding deposit. Use the same deposit schedule for Connecticut withholding purposes that you are following for federal withholding purposes. Do not file Form CT-WH if no payment is due. Employers who withhold less than $500 for a calendar quarter may pay the tax quarterly with Form CT-941.
By January 31, 1996
File Form CT-941, Connecticut Quarterly Reconciliation of Withholding, for the fourth quarter of 1995 (even if no tax is due).
Give to each employee, to whom Connecticut wages were paid in 1995, federal Form W-2, Wage and Tax Statement, and any other information returns, showing the amount of Connecticut income tax withheld in 1995.
By February 15, 1996
Obtain by this date, a new Form CT-W4 from each employee who claimed exempt status (filing status E) from Connecticut income tax withholding in the prior year.
By February 16, 1996
Begin withholding at a flat rate of 4.5% without allowance for exemption from each employee who claimed exempt status from Connecticut income tax withholding in the prior year and did not provide a new Form CT-W4 by February 15, 1996. The Form CT-W4 previously given to you claiming exemption has now expired.
By February 29, 1996
File Form CT-W3, Connecticut Annual Reconciliation of Wages, together with all state copies of federal Form W-2 reporting Connecticut wages paid to employees during calendar year 1995.
NOTE: State copies of federal Form W-2 are required for all employees, to whom Connecticut wages were paid in 1995, even if no Connecticut income tax was withheld in 1995.
If required, file Form CT-1096, Connecticut Annual Summary and Transmittal of Information Returns, and "State Copies" of certain Forms 1099 and W-2G. (Refer to 1995 Connecticut Circular CT, Page 16 for a list of required forms.)
On or before April 30, July 31, October 31, 1996 and January 31, 1997
File Form CT-941, (even if no tax is due), together with copies of Forms CT-W4 claiming exempt status from the tax given to you by employees during that quarter.
NOTE: Send only copies of Form CT-W4 as required. (See 1995 Connecticut Circular CT, Page 12 for requirements.)
EFFECT ON OTHER DOCUMENTS: AN 91(9), Important Notice to Employers of Domestic Service Workers, is obsolete.
EFFECT OF THIS DOCUMENT: An Announcement is a document that alerts taxpayers to important information. Such information may involve new departmental policies or procedures.
PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.
FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.
Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web home page at http://www.ct.gov/drs.
Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.
Withholding Tax, Household Employers