SN 96(8)
1996 Legislative Changes Concerning
"Nanny Tax" Withholding
PURPOSE: The purpose of this Special Notice is to describe the legislative changes made during the 1996 session of the General Assembly concerning Connecticut income tax withholding by household employers.
BACKGROUND: Employers who maintain an office or transact business within Connecticut are required to deduct and withhold Connecticut income taxes from any employee wages from which federal income taxes are required to be deducted and withheld. Federal income taxes are not required to be deducted and withheld from the wages of a household employee, but a household employer and a household employee may agree to have the employer deduct and withhold federal income taxes from the employee's wages. Similarly, Connecticut income taxes are not required to be deducted and withheld from the wages of a household employee, but a household employer and a household employee may agree to have the employer deduct and withhold Connecticut income taxes from the employee's wages.
Household employees, also referred to as "domestic service workers," work in or around a private home of the person by whom they are employed ("the household employer") or in or 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.
On September 20, 1995, the Department issued AN 95(8), Withholding Rules for Connecticut Employers. In that Announcement, the Department stated that, where Connecticut income tax withholding was agreed to by a household employer and a household employee, the taxes were to be paid over to the Department by the employer on or before April 15 of the following calendar year as long as the employer was deducting and withholding from wages $500 or more of Connecticut income taxes per calendar quarter, and the employer requested annual filer status by November 30, 1995. The Department also stated that, if the household employer was deducting and withholding less than $500 of Connecticut income taxes per calendar quarter, the taxes were required to be paid over to the Department by the employer on or before the last day of the month next succeeding the calendar quarter for which the taxes were deducted and withheld from employee wages. Finally, the Department announced that it would seek legislation that would allow a household employer who was deducting and withholding from wages less than $500 of Connecticut income taxes per calendar quarter to pay over such taxes to the Department on or before April 15 of the following calendar year.
STATUTORY AUTHORITY: Conn. Gen. Stat. §12-707, as amended by 1996 Conn. Pub. Acts 221, §21.
EFFECTIVE DATE: Effective from passage (June 4, 1996).
ALL HOUSEHOLD EMPLOYERS ARE NOW PERMITTED TO PAY OVER CONNECTICUT INCOME TAXES THAT ARE DEDUCTED AND WITHHELD FROM HOUSEHOLD EMPLOYEE WAGES ANNUALLY: Legislation was, in fact, enacted that allows a household employer who is deducting and withholding from household employee wages less than $500 of Connecticut income taxes per calendar quarter to pay over such taxes to the Department on or before April 15 of the following calendar year. However, the employer must request annual filer status in the manner described below.
HOW TO REQUEST "ANNUAL FILER STATUS": A household employer who is already registered to withhold Connecticut income tax solely for a household employee or employees, but whose request for annual filer status was not previously granted, may request annual filer status by writing to: Department of Revenue Services, Registration Unit, P.O. Box 2937, Hartford, Connecticut 06104-2937.
A household employer who is not already registered to withhold Connecticut income tax for a household employee or employees may register and request annual filer status by submitting a properly completed Form REG-1, Application for Tax Registration Number, with a written request stating that the employer is a household employer whose household employee has agreed to have the employer deduct and withhold Connecticut income taxes from the employee's wages, to: Department of Revenue Services, Registration Unit, P.O. Box 2937, Hartford, Connecticut 06104-2937.
The Department will give written notice of its decision to grant or deny a request for annual filer status, and if the request is granted, of the first calendar year for which the request is granted.
DUE DATE FOR REQUESTING ANNUAL FILER STATUS: A written request for annual filer status for calendar year 1996 will be granted by the Department if and only if the request is received by the Department on or before October 31, 1996. A written request for annual filer status for calendar year 1997 or thereafter will be granted by the Department if and only if the request is received by the Department on or before March 31 of that year; otherwise, the request will be granted for the succeeding calendar year. Once the request for annual filer status has been granted by the Department and is in effect, no new request need be made by the household employer for succeeding calendar years.
FILING REQUIREMENTS: The household employer is required, on or before April 15 of the following calendar year, to file just one Form CT-941, Connecticut Quarterly Reconciliation of Withholding, and to pay over, with the Form CT-941, the Connecticut income tax that was deducted and withheld from household employee wages. (A household employer may not report and pay over Connecticut income tax that was so deducted and withheld with the employer's own Connecticut income tax return.) The one Form CT-941, however, shall report the Connecticut income tax required to be deducted and withheld by such household employer from household employee wages during the entire calendar year. If the request for annual filer status is not in effect, the household employer shall be required to file Forms CT-941 for each calendar quarter and to pay over Connecticut income tax deducted and withheld from employee wages on or before the last day of the month next succeeding the end of each calendar quarter.
IF APRIL 15 FALLS ON A SATURDAY, SUNDAY OR LEGAL HOLIDAY: Wherever this Special Notice refers to April 15, substitute the next succeeding day that is not a Saturday, Sunday or legal holiday, if April 15 falls on a Saturday, Sunday or legal holiday, as defined in Conn. Gen. Stat. §12-39a(b).
CALENDAR YEAR PRESUMPTION: If the household employer's accounting period for federal income tax purposes (and, thus, for Connecticut income tax purposes) is other than the calendar year, then substitute "the fifteenth day of the fourth month following the close of the employer's taxable year which begins during the calendar year during which Connecticut income tax was deducted and withheld from household employee wages" wherever this Special Notice refers to April 15.
OTHER FORMS STILL REQUIRED TO BE PROVIDED OR FILED: Household employers, whether or not registered for Connecticut income tax withholding purposes, are still required to give the appropriate copies of federal Form W-2, Wage and Tax Statement, to each household employee on or before January 31 of the year next succeeding the calendar year during which Connecticut wages were paid to such employee and to file with the Department, on or before the last day of February of the year next succeeding the calendar year during which Connecticut wages were paid to household employees, Form CT-W3, Connecticut Annual Reconciliation of Wages, together with every "state copy" of federal Forms W-2 reporting Connecticut wages paid to household employees during the preceding calendar year (whether or not Connecticut income tax was deducted and withheld from those wages). If a household employer is not registered for Connecticut income tax withholding purposes, the employer should enter the words "HOUSEHOLD EMPLOYER" in the space reserved for the Connecticut tax registration number on the Form CT-W3.
EFFECT ON OTHER DOCUMENTS: AN 95(8) is obsoleted in part, with that portion of AN 95(8) headed "The 'Nanny Tax' - Withholding for Household Employees" no longer to be relied upon on or after the date of issuance of this Special Notice.
EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department's informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.
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 site.
SN 96(8)
Income tax
Issued: 7/19/96