Income Tax Withholding by Payers of Pensions and Annuities
PURPOSE: This Special Notice describes the requirements to withhold Connecticut income tax from the payments of pensions and annuities made to Connecticut residents.
EFFECTIVE DATE: Effective upon issuance and applicable to payments of pensions and annuities made on or after January 1, 1992.
STATUTORY AUTHORITY: 1991 Conn. Pub. Acts 3, §§56 (b) and 92 (June Spec. Sess.)
PENSION PAYMENTS SUBJECT TO INCOME TAX WITHHOLDING: Payers of pensions and annuities maintaining an office or transacting business in Connecticut will be required to withhold Connecticut income tax from the pensions and annuities of Connecticut residents if requested to do so by resident recipients.
This requirement applies to all payers of pensions and annuities, both public and private, and to all payments, including lump sum distributions.
This requirement applies whether or not the payments are made from a Connecticut location.
The minimum amount that a recipient can request to be withheld is $10 per payment.
No maximum limit is placed on the amount that can be withheld, but it must be an even dollar amount.
PENSION AND ANNUITY PAYMENTS TO NONRESIDENTS: Pension and annuity payments to nonresidents in 1992 are not subject to Connecticut income tax withholding. The decision on whether these payments to nonresidents in 1991 are subject to Connecticut income tax will be addressed in a subsequent publication.
REGISTERING TO WITHHOLD TAX: If a payer is not already registered with DRS to withhold income tax, the payer must complete Form REG-1, Application for Tax Registration Number, which is included with this notice. The forms necessary to report state income tax withheld will then be sent to the payer.
VOLUNTARY REGISTRATION TO WITHHOLD TAX: An out-of-state payer who is not required to register to withhold Connecticut income tax may register solely for the purpose of withholding Connecticut income tax for their recipients who are Connecticut residents. Use Form REG-1 to register for voluntary withholding.
AGREEMENTS BETWEEN PAYERS AND RECIPIENTS: A 1992 Form CT-W4P, Withholding Certificate for Pension or Annuity Payments, is included with this notice. A payer must provide recipients of the pension or annuity payments with a copy of this form or the payer may design his own form, provided it contains the same information as the 1992 Form CT-W4P. In either case, a written request for withholding (Form CT-W4P or a written request providing the same information) must be on file before withholding begins.
REPORTING THE TAX WITHHELD: In general, payers should follow the instructions to employers in the 1992 Circular CT, Employer's Tax Guide entitled "HOW TO REPORT TAXES WITHHELD". Where information required from pension and annuity plan payers differs from information required from employers, the information for payers is explained below.
Wage and Tax Statement: Federal Forms 1099R and W-2P, showing the amount of Connecticut income tax withheld in 1992, must be given by payers of pension and annuity payments to their recipients on or before January 31, 1993.
Annual Reconciliation: Form CT-W3, Connecticut Annual Reconciliation of Withholding, is due from all withholding payers on the last day of February. No payment is to be made with this form. Payers must file all state copies of Federal Forms 1099R and W-2P with the annual reconciliation, even if no Connecticut income tax was withheld. Additional information concerning informational reporting can be obtained by calling Taxpayer Services at 860-297-4900 or 1-800-382-9463 or by writing to:
Taxpayer Services Division
Department of Revenue Services
25 Sigourney Street
Hartford, CT 06106
PENALTIES: Penalties and interest as provided by law will be imposed. Please refer to the section in the 1992 Circular CT, Employer's Tax Guide entitled "PENALTIES" for further information.