Estimated Connecticut Income Taxes
PURPOSE: This publication explains filing requirements for paying estimated income tax. Connecticut taxpayers can be charged interest for underpaying their estimated income tax, even though they pay all the Connecticut income tax they owe by the April 15 filing deadline. Connecticut law requires taxpayers to pay Connecticut income tax during the year, through withholding or estimated tax payments. Most employees have these taxes automatically withheld from their paychecks. If you are self-employed, receive a pension or annuity, or are receiving unemployment compensation and have not elected Connecticut income tax withholding, or you receive any other income from which Connecticut income tax is not withheld, you should probably be making estimated income tax payments.
WHAT IS ESTIMATED TAX? Estimated tax is tax on income in excess of that income on which a sufficient amount of tax has been withheld. Because it is difficult to determine your exact tax liability before the end of the year, you make estimated tax payments during the year based upon what you expect to earn in the current year or based upon what you actually earned in the prior year. When you file your annual income tax return, you report your estimated tax payments. If you have overpaid your estimated tax during the year, you will receive a refund. If you have underpaid your taxes during the year, you will have to pay the tax you owe and you may have to pay interest on the amount of the underpayment.
WHO SHOULD PAY ESTIMATED TAX? In general, you must make estimated payments of Connecticut income tax if you expect to owe, after subtracting Connecticut income tax withheld for the taxable year, more than $200 after tax credits, if any, are taken into account and you expect your Connecticut income tax withholding to be less than your required annual payment.
WHAT IS MY REQUIRED ANNUAL PAYMENT? Your required annual payment is the lesser of:
- 90% of the total Connecticut income tax shown on your current year return;
- 100% of the total Connecticut income tax shown on your preceding year return, if you filed a Connecticut income tax return for the preceding taxable year that covered a 12-month period.
NOTE: You do not have to make estimated income tax payments if you did not file a Connecticut income tax return for the preceding taxable year because you had no Connecticut income tax liability and you were either:
- a resident of Connecticut for the entire preceding taxable year;
- a nonresident or part-year resident of Connecticut with Connecticut source income.
INCOME NOT SUBJECT TO WITHHOLDING: The checklist below includes many (although not all) of the types of income that are not subject to Connecticut income tax withholding and that may require you to pay estimated tax:
- pensions and annuities (if no Connecticut income tax is withheld);
- unemployment compensation;
- prize winnings;
- capital gains;
- interest income;
- dividend income;
- gambling winnings (if no Connecticut income tax is withheld);
- rental income;
- federally taxable social security.
To avoid the filing of estimated tax, you may request your employer or pension plan payer to withhold additional amounts from your wages or pension income to cover the taxes on other income. You can make this change by providing your employer or pension payer with a revised Form CT-W4, Form CT-W4P or Form CT-W4CS.
HOW DO I ESTIMATE MY TAX? To calculate your estimated tax payments, you will need Form CT-1040ES, Estimated Connecticut Income Tax Payment Coupon for Individuals. The instructions include a worksheet for computing your estimated tax payments, exemption and credit tables, and a coupon to be mailed in with your estimated payments.
NOTE: If you made estimated Connecticut income tax payments last year, you will receive an individual estimated income tax payment coupon book by mail in January. The coupons are preprinted with your name, address and social security number to ensure that your payments are properly credited. If you did not make estimated payments last year, use Form CT-1040ES included in your Connecticut income tax booklet or available from the department's Forms Unit to make your first payment. If you file this form, additional coupons will be mailed to you.
WHEN DO I PAY MY ESTIMATED INCOME TAX? Generally, you must make your first estimated income tax payment by April 15. You can pay all of your estimated tax with the first payment or pay the tax in four installments, due April 15, June 15, September 15, and January 15. (Taxpayers who are not calendar year filers should use the same filing dates as they do for federal income tax purposes.)
For taxable years beginning on or after January 1, 1996, a taxpayer whose requirement to make estimated payments begins on or after April 1 or who has changes in income or deductions throughout the year, will no longer be permitted to divide their required annual payment into equal installments for the remaining periods. Such taxpayers may benefit from using the annualized income installment method. (See the section in this publication entitled: What If My Income Varies Throughout the Year?)
HOW MUCH SHOULD I PAY WITH EACH INSTALLMENT? In general, you are required to pay 25% of your required annual payment with each installment. Your installments should be made as follows:
|DUE DATE||PERCENTAGE DUE|
(a total of 50% of your required annual payment should be paid by this date.)
(a total of 75% of your required annual payment should be paid by this date.)
(a total of 100% of your required annual payment should be paid by this date.)
SPECIAL RULES FOR FARMERS AND FISHERMEN: For taxable years beginning on or after January 1, 1996, if you are a farmer or fisherman (as defined in Section 6654(i)(2) of the Internal Revenue Code) who is required to make estimated payments, you will be required to make only two estimated income tax installments due June 15 and January 15. Each installment shall be the lesser of 37% of the current year's tax or 50% of the prior year's tax. To calculate your estimated payments, you must request a copy of IP 95(10), Estimated Income Tax Requirements for Farmers and Fishermen.
WHAT IF MY INCOME VARIES DURING THE YEAR? If you do not earn your income evenly throughout the year, you may benefit from using the annualized income installment method. Instead of paying your required annual payment in four equal installments, you may be able to reduce or eliminate the amount of one or more installments. You will make up the difference by making a larger payment for the period or periods when more of your income is earned. For information about this method, request from the Forms Unit a copy of IP 93(6.2), A Guide to Calculating Your Annualized Estimated Income Tax Installments and Worksheet CT-1040AES.
NOTE: If your estimated installment payments are based on the annualized income installment method, you must attach to your income tax return Form CT-2210, Underpayment of Estimated Income Tax by Individuals Trusts and Estates, to show that your estimated income tax is not underpaid and is not subject to interest charges.
WHAT HAPPENS IF I UNDERESTIMATE MY TAX? If you are required to make estimated income tax payments and you do not pay enough tax during the year through withholding and/or estimated tax payments and, or if you do not make the payments on time, interest may be charged. Interest is calculated separately for each installment from the due date of that installment until the earlier of the following dates: April 15 or the date on which the underpayment is paid. (You may owe interest for an earlier installment even if you paid enough to make up the underpayment with a later installment.) Interest of 1% per month or fraction thereof will apply to the underpayment(s).
For taxable years beginning on or after January 1, 1996, if you file your income tax return for the taxable year on or before January 31 of the following year and have paid in the amount computed on the return as payable for the taxable year, no interest will apply for the fourth required installment. (This does not apply to taxpayers paying estimated federal and Connecticut income taxes as farmers or fishermen.)
MAY I APPLY AN OVERPAYMENT IN THE PRIOR YEAR TO THE NEXT YEAR'S ESTIMATE? When you file a final return for the year, you may request that overpayments of Connecticut income tax be applied to your next year's estimated tax. If you file your Connecticut income tax return on or before April 15 (or if you file a timely request for extension of time to file and your income tax return is filed within the extension period) the overpayment will be treated as estimated tax paid on April 15.
RELATED FORMS AND PUBLICATIONS:
Form CT-1040ES, Estimated Connecticut Income Tax Payment Coupon
IP 92(9.2), Is My Connecticut Withholding Correct?
IP 93(6.2), A Guide to Calculating Your Annualized Estimated Income Tax Installments and Worksheet CT-1040AES
IP 95(10), Estimated Income Tax Requirements for Farmers and Fishermen
Form CT-W4, Employee's Withholding or Exemption Certificate
Form CT-W4P, Withholding Certificate For Pension or Annuity Payments
Form CT-W4CS, Request To Withhold Connecticut Income Tax From Civil Service Annuity
FORMS AND PUBLICATIONS: Forms and publications are available all day, seven days a week:
- Internet: Preview and download forms and publications from the DRS Web site: http://www.ct.gov/drs
- Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (toll-free within Connecticut) and select Option 2 from a touch-tone phone.
Replaces: IP 92(5.4) issued 10/5/94