Income Tax Withholding on Certain Gambling Winnings
PURPOSE: This Special Notice describes the requirements to withhold Connecticut income tax from certain gambling winnings paid to residents of this state.
EFFECTIVE DATE: Effective upon issuance and applicable no later than January 1, 1992 to payments of gambling winnings.
STATUTORY AUTHORITY: 1991 Conn. Pub. Acts 3, §56 (June Spec. Sess.).
INCOME TAX TO BE WITHHELD FROM CERTAIN GAMBLING WINNINGS: A payer of gambling winnings maintaining an office or transacting business in Connecticut must withhold Connecticut income tax from such winnings if the winnings are paid to a Connecticut resident or to someone receiving them on behalf of a Connecticut resident and the winnings are subject to federal income tax withholding. Individuals already receiving installments from past lottery winnings, who would otherwise meet the criteria for mandatory withholding, will also be subject to the mandatory withholding requirements.
RESIDENT DEFINED: A resident of Connecticut includes:
- an individual domiciled in this state; and
- an individual domiciled elsewhere who has a permanent place of abode in this state and who spends in the aggregate 183 days or more in this state in the taxable year.
DETERMINATION OF WINNER'S STATUS AS A CONNECTICUT RESIDENT: The payer determines the resident status of a winner based upon the address furnished and the identification provided by the individual at the time payment of winnings is made. Federal Form W-2G (Certain Gambling Winnings) must be completed by the payer, stating the winner's name, address and taxpayer identification number. The winner must sign Form W-2G and declare, under penalties of perjury, that the information provided is correct.
DOCUMENTATION OF RESIDENCE REQUIRED: The Payer must additionally require two forms of identification from the winner(s), including but not limited to a social security card or driver's license.
RESIDENT STATUS OF MULTIPLE WINNERS: If more than one person is entitled to a share of the winnings, one Federal Form 5754 (Statement by a Person(s) Receiving Gambling Winnings) must be completed, identifying each of the persons entitled to a share. Form 5754 is also used when the recipient is not a person entitled to a share. This form will list the name, address, taxpayer identification number of all persons entitled to any pay of the winnings. The form must be signed, under penalties of perjury, by the person (or persons) receiving the winnings. The payer will use the information on Form 5754 to prepare Federal Form W-2G for each of the winners. A copy of Form 5754 must be retained by the payer; it need not be submitted to the Department.
If the person receiving the winnings is unable to property identify any of the persons entitled to a share of the winnings or their state of residence, the amount of the winnings applicable to such other person shall be considered as having been won by a resident of Connecticut and income tax must be withheld.
AMOUNT TO BE WITHHELD: The amount of Connecticut income tax to be deducted and withheld by payers of gambling winnings that are subject to federal income tax withholding is the highest effective rate of Connecticut income tax for the applicable taxable year (1.5% for taxable year 1991; 4.5% for the taxable year 1992) without allowance for the personal exemption or personal credit.
FILING AND REMITTANCE OBLIGATIONS OF PAYERS: For purposes of determining the applicable rules for filing and remitting of withheld taxes, a payment of gambling winnings subject to tax must be treated as if it were a payment of wages by an employer to an employee for a payroll period. That is, all requirements with respect to filing Connecticut employer returns, furnishing information, recordkeeping and payment of Connecticut income tax withheld on wages apply equally to the withholding of Connecticut income tax on gambling winnings. For further information, see 1991 Connecticut Circular CT, Employer's Tax Guide.
REGISTRATION: Payers of gambling winnings that are subject to federal income tax withholding must register to withhold Connecticut income tax with the Department of Revenue Services ("DRS") by completing Form REG-1 (Application for Tax Registration Number). Payers who are registered with DRS will receive the Employer's Withholding Remittance Coupon Book (to be used by payers of gambling winnings as well as by employers) containing the following forms preprinted with the payer's name, address, Connecticut tax registration number and federal employer identification number:
Form CT-WH, Connecticut Withholding Tax Payment: Form CT-WH is to be mailed to DRS with each Connecticut income tax withholding payment. Due dates for payment of Connecticut income tax withholding are the same as the due dates for the payer's deposits of federal income tax withholding.
Quarterly Reconciliation: Form CT-941, the Connecticut Quarterly Reconciliation of Withholding, is to be filed with DRS when the payer files the Quarterly Federal Tax Return. A quarterly reconciliation is required, as long as the payer has an active account with DRS, even if no tax is due. Due dates are: First Quarter, April 30; Second Quarter, July 31; Third Quarter, October 31; Fourth Quarter, January 31.
Statement of Winnings: Federal Form W-2G showing the amount of Connecticut income tax withheld in 1991 must be given by payers to payees.
Annual Reconciliation: Form CT-W3, Connecticut Annual Reconciliation of Withholding, is due from all payers on the last of February. No payment is to be made with this form. State copies of Federal Form W-2G showing Connecticut income tax withheld must be remitted to the state.
Correction/Reorder Form: Form CTC allows payers to make corrections to taxpayer identification information or to reorder an additional coupon book for the current year.
INFORMATIONAL REPORTING: When a resident of Connecticut receives any payment on which informational reporting is required by the Internal Revenue Service, the payer must provide DRS with the state copy of Federal Form W-2G, even if no Connecticut income tax was withheld.
WITHHOLDING UPON CHANGE OF RESIDENCE: Where winnings are paid in installments (e.g., a lottery prize funded by an annuity), the payer must withhold Connecticut income tax from each installment as long as the winner is a resident. If the resident becomes a nonresident, the payer must continue to withhold until such time as the payee provides proof of change of residence on a form prescribed by DRS. Payments made to winners who were formerly nonresidents shall become subject to Connecticut income tax withholding.
REFUND OF INCOME TAX WITHHELD FROM NONRESIDENT: If Connecticut income tax is withheld from a nonresident in error, the nonresident may file a Connecticut nonresident income tax return to claim a refund of the tax withheld.
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.