IP 96(7)

Employer's Tax Guide

(effective July 1, 1998)

This guide and Withholding Tables are not subject to change until July 1, 2000. 

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Additional Information for Employees Where Both Spouses Work

AN 96(3.1), Information About Supplemental Withholding Tables for Joint Filers Who Both Earn Wage Income, Effective July 1, 1998

EMPLOYERS: Please post this announcement for your employees.

Employees who file a joint income tax return where both spouses work and choose filing status "A" on their Form CT-W4 should refer to the supplemental tables on Form CT-W4, effective July 1, 1998 and adjust their withholding accordingly. Employers should post AN 96(3.1), Information About Supplemental Withholding Tables for Joint Filers Who Both Earn Wage Income.

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Important Income Tax Withholding Contacts

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CONNECTICUT FORMS REFERENCED IN THIS BOOKLET

• CT-WH Connecticut Withholding Tax Payment

• CT-941 Connecticut Quarterly Reconciliation of Withholding

• CT-W4 Employee's Withholding or Exemption Certificate

• CT-1096 Connecticut Annual Summary and Transmittal of Information Returns

• REG-1 Application for Tax Registration Number

• CT-W3 Connecticut Annual Reconciliation of Withholding

• CT-W4P Withholding Certificate for Pension or Annuity Payments

• CT-W4NA Employee's Withholding or Exemption Certificate - Nonresident Apportionment

• CT-941X Amended Connecticut Quarterly Reconciliation of Withholding

• CT-8809 Request for Extension of Time to File Informational Returns

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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:

• Your payment is considered timely-filed if it is actually received, or if the date shown by the U.S. Post Office cancellation mark, 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 of Connecticut income tax for a calendar quarter may pay the tax quarterly with Form CT-941, Connecticut Quarterly Reconciliation of Withholding.

On or before April 30, July 31, October 31 and January 31

• File Form CT-941 (even if no tax is due or has been withheld for the quarter), together with required copies of Forms CT-W4, Employee's Withholding or Exemption Certificate, claiming exempt status from the tax given to you by employees during that quarter.
  
  NOTE: Send copies of Form CT-W4 to DRS only as required. (See Employee's Withholding or Exemption Certificate.)

By January 31

• Give to each employee to whom Connecticut wages were paid during the preceding calendar year, federal Form W-2, Wage and Tax Statement, and any other information returns, showing the amount of Connecticut income tax withheld.

By February 15

• Obtain 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

• 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 who did not provide a new Form CT-W4 by February 15. The Form CT-W4 previously filed by the employee claiming exemption has now expired.

By the last day of February

• File Form CT-W3, Connecticut Annual Reconciliation of Wages, together with every "state copy" of federal Form W-2 reporting Connecticut wages paid to employees during the prior calendar year.
  
  NOTE: State copies of federal Form W-2 are required for all employees to whom Connecticut wages were paid during the prior calendar year, even if no Connecticut income tax was withheld during the calendar year.

• If required, file Form CT-1096, Connecticut Annual Summary and Transmittal of Information Returns, and the "state copy" of certain federal Forms 1099 and W-2G.

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All withholding requirements, tables and forms effective July 1, 1998, are included in IP 92(8.4), Connecticut Circular CT - Employer's Tax Guide, which updates and combines into one publication the withholding instructions and the withholding tables and forms. IP 92(8.3), Connecticut Circular CT Connecticut Circular CT and IP 96(7.2), Withholding Tables and Forms are modified and superseded and may not be relied upon after June 30, 1998.

The Connecticut withholding tables and withholding calculation rules in this publication reflect a reduction in the Connecticut income tax. All employers must use these updated withholding tables and calculation rules for wages paid on or after July 1, 1998. Continue to use the withholding tables and withholding calculation rules effective July 1, 1996 for wages paid before July 1, 1998.

The due date for submitting Form CT-W4 to the Department of Labor (DOL) has changed. Employers must send each new and rehired employee's Form CT-W4 to DOL within 20 days from the date of hire. (See Reporting New Employees to the Department of Labor for details.)

Employers are only required to submit Forms CT-W4 to DRS in certain circumstances. Do not send exempt Forms CT-W4 to DRS unless the conditions under Reporting Certain Employees to the DRS are met.

Employees who file a joint income tax return where both spouses work and choose filing status "A" on their Form CT-W4, should refer to the supplemental tables on Form CT-W4, effective July 1, 1998, and adjust their withholding accordingly. Employers should post AN 96(3.1), Information About Supplemental Withholding Tables for Joint Filers Who Both Earn Wage Income.

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WHO IS REQUIRED TO WITHHOLD CONNECTICUT INCOME TAX?

Anyone who maintains an office or transacts business in Connecticut and who is considered an employer for federal income tax withholding purposes must withhold Connecticut income tax, whether or not the payroll department is located in Connecticut. Also, payers of nonpayroll amounts, gambling winnings and professional athletes and entertainers have special withholding requirements which are described under Nonpayroll Income.

Any employer or payer who is required to withhold Connecticut income tax must register for withholding tax with the State of Connecticut Department of Revenue Services (DRS).

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HOW TO REGISTER FOR WITHHOLDING TAX

EMPLOYERS

Employers who are not already registered with DRS, including employers starting a new business, must register to withhold Connecticut income tax by completing Form REG-1, Application for Tax Registration Number. Form REG-1 is also used to register a business for most other state taxes, including sales and use taxes and corporation business tax.

Employers who are already registered with DRS for other state taxes are still required to register to withhold Connecticut income tax. Complete Form REG-1 to register for withholding as an additional tax.

Employers who acquire an existing business must also complete Form REG-1 to obtain a Connecticut tax registration number. The new owner cannot use the previous owner’s tax registration number or withholding tax coupons.

The DRS tax registration number and federal employer identification number must appear on all Connecticut income tax withholding forms and on all correspondence with DRS. Do not use the registration number issued by the Connecticut Department of Labor on DRS forms.

PAYERS OF NONPAYROLL AMOUNTS

A new payer who is required to deduct and withhold Connecticut income tax from nonpayroll amounts (e.g. pension and annuity and gambling winnings), must complete Form REG-1. See Nonpayroll Income for the requirements to withhold Connecticut tax. The payer may request annual filer status by submitting with Form REG-1 a written request stating that the payer pays only nonpayroll amounts, files federal Form 945, and is not required to file federal Forms 941 quarterly. If all of these requirements are met, the payer will file one Form CT-941, due January 31, reporting annual amounts.

This request must be received on or before March 31st of the calendar year in order to be effective for that calendar year. A new request is not required to be made for succeeding calendar years, as long as the payer remains an annual filer.

Payers of nonpayroll amounts who are already registered to withhold Connecticut income tax may request annual filer status by submitting the written request stating the information listed above to:

HOUSEHOLD EMPLOYERS

Household employers are not required to withhold Connecticut income tax from the wages of their household employees but may do so voluntarily by agreement between the employer and the employee. Household employers who agree to withhold Connecticut income tax must register with DRS for income tax withholding by submitting, with a completed Form REG-1, a written request stating that they are a household employer and would like annual filer status. See SN 96(8), 1996 Legislative Changes Concerning "Nanny Tax" Withholding.

A household employer already registered to withhold Connecticut income tax may request annual filer status by submitting a written request stating they are a household employer and would like annual filer status. Send the request to:

This request must be received on or before March 31st of the calendar year in order to be effective for that calendar year. A new request is not required to be made for succeeding calendar years, as long as the household employer remains an annual filer.

Every household employer is required to file federal Form(s) W-2, Wage and Tax Statement, with Form CT-W3, Connecticut Annual Reconciliation of Withholding, whether or not the employer is registered with DRS and whether or not the employer has withheld any Connecticut income tax. Form CT-W3 is due on or before the last day of February, to report Connecticut wages paid in the preceding year. Unregistered household employers should enter the words "HOUSEHOLD EMPLOYER" in the space reserved for the Connecticut tax registration number on Form CT-W3.

AGRICULTURAL EMPLOYERS

An agricultural employer must register by completing Form REG-1, and withhold Connecticut income tax from the wages of agricultural workers if:

1. the employer is required to withhold federal income tax from the worker's wages (see NOTE below); or

2. the employer and employee voluntarily agree to have Connecticut income tax withheld.

Agricultural employers may request annual filer status by submitting with a completed Form REG-1, a written request stating that they are an agricultural employer who will file federal Form 943 and who employs farm workers only.

Agricultural employers who are already registered to withhold Connecticut income tax may request annual filer status by submitting a written request stating the information listed above. Send requests to:

Every agricultural employer is required to file federal Form(s) W-2, with Form CT-W3, whether or not the employer is registered with DRS, and whether or not the employer has withheld any Connecticut income tax. Form CT-W3 is due on or before the last day of February to report Connecticut wages paid in the preceding year. Unregistered agricultural employers should enter the words "AGRICULTURAL EMPLOYER" in the space reserved for the Connecticut tax registration number on Form CT-W3.

NOTE: In general, an agricultural employer is required to withhold federal income tax (and Connecticut income tax) from an agricultural worker receiving cash wages if those cash wages are subject to FICA (social security) tax withholding. Refer to Internal Revenue Service Publication 51, Agricultural Employer Tax Guide, for information on federal income tax withholding for agricultural workers. To obtain a copy of Publication 51, Agricultural Employer Tax Guide, call the IRS at 1-800-829-3676.

PROFESSIONAL ATHLETES AND ENTERTAINERS

Refer to Professional Athletes and Entertainers under What Income is Subject to Connecticut Income Tax Withholding to determine which payers of professional athletes and entertainers must register for Connecticut income tax withholding.

SEASONAL EMPLOYERS

A new employer whose liability for Connecticut income tax withholding will occur seasonally and in the same one or more quarters each year must complete Form REG-1. The employer may request seasonal filer status by submitting with Form REG-1 a written request stating which quarters the employer will be active.

This request must be received on or before the last day of a calendar quarter in order to be effective for that calendar quarter. A new request is not required to be made for succeeding calendar years, as long as the employer remains a seasonal filer.

Seasonal employers who are already registered to withhold Connecticut income tax may request seasonal filer status by submitting a written request, stating the quarters during which their business is active, to:

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VOLUNTARY REGISTRATION TO WITHHOLD TAX

Any employer who is not required to register to withhold Connecticut income tax may register solely for the purpose of withholding Connecticut income tax for its employees who make an agreement with the employer to have Connecticut income tax withheld.

Upon registration, the employer will be treated as an employer required to withhold Connecticut income tax with respect to his or her employees while the agreement remains in effect.

VOLUNTARY REGISTRATION BY PERSONS OTHER THAN EMPLOYERS TO WITHHOLD TAX

Any person (other than an employer) who is not required to register to withhold Connecticut income tax may register solely for the purpose of withholding Connecticut income tax if both the payer and the payee voluntarily agree to have Connecticut income tax withheld.

Upon registration the payer will be treated as an employer required to withhold Connecticut income tax with respect to his or her payees while the agreement remains in effect.

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WHAT INCOME IS SUBJECT TO CONNECTICUT INCOME TAX WITHHOLDING?

In general, Connecticut follows the federal rules for determining income subject to income tax withholding. Employers should consult the Internal Revenue Service Circular E, Employer’s Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide, to determine federal income tax withholding rules for specific types of income.

WAGES

In general, all amounts determined to be wages and subject to federal income tax withholding are also wages for Connecticut income tax withholding purposes. Such amounts include, but are not limited to, fringe benefits, supplemental compensation, golden parachutes, sick pay, moving expenses and severance pay.

• Resident wages subject to Connecticut income tax withholding: All wages of a Connecticut resident are subject to Connecticut income tax withholding, even though the resident works outside of Connecticut. However, if the employer is required to withhold from the resident’s wages the income tax of other states or their political subdivisions, or the District of Columbia, the employer must withhold Connecticut income tax only to the extent the Connecticut tax exceeds the amount required to be withheld for the other state(s) for services performed in the other state. Refer to the examples below for illustrations.

Example 1: A Connecticut resident is employed in State X by an employer maintaining an office or transacting business both in Connecticut and in State X. The State X income tax payable on the employee’s wages is $100. The Connecticut income tax that would otherwise be required to be withheld from such wages is $160. The amount of Connecticut income tax to be deducted and withheld is $60.

Example 2: A Connecticut resident works in State Y for an employer maintaining an office or transacting business both in Connecticut and in State Y. The State Y income tax payable on the employee’s wages is $200. The Connecticut income tax that would otherwise be required to be withheld from such wages is $200. No Connecticut income tax is to be deducted and withheld.

Example 3: A Connecticut resident works in State Z for an employer maintaining an office or transacting business both in Connecticut and in State Z. The State Z income tax payable on the employee's wages is $300. The Connecticut income tax that would otherwise be required to be withheld from such wages is $250. No Connecticut income tax is to be deducted and withheld.

• Nonresident wages subject to Connecticut income tax withholding: Wages of a nonresident are subject to Connecticut income tax withholding if the wages are paid for services rendered in Connecticut. Wages of a nonresident are not subject to Connecticut income tax withholding if the wages are paid for services performed entirely outside of Connecticut. Refer to the examples below for illustrations:

Example 1: Working solely within Connecticut: A resident of State X works in Connecticut for an employer that is doing business in Connecticut and in State X. The employer must withhold Connecticut income tax because the services are performed in Connecticut. The employer should contact the other state to determine to what extent it may be required to withhold income tax for State X.

Example 2: Working solely outside Connecticut: A resident of State Y works in State Y for an employer whose main office, including the payroll department, is located in Connecticut. The employer will not withhold Connecticut income tax even though payment is made from a point in Connecticut, since the employee is a nonresident and performs all his services outside Connecticut. The employer should contact State Y for withholding requirements in that state.

Example 3: Working partly within and partly outside Connecticut: A resident of State Z works partly in Connecticut and partly in State Z for an employer who is doing business in Connecticut and State Z. The employer must withhold Connecticut income tax on wages to the nonresident employee in the same proportion that the employee’s wages derived from or connected with sources within Connecticut relate to the employee’s total wages. See Determining How Much to Withhold From Nonresident Employees Who Work Partly Within and Partly Outside Connecticut.

NONPAYROLL INCOME

Certain nonpayroll income (also known as nonpayroll amounts, as described in 26 C.F.R. §31.6011(a)-4(b)) is subject to withholding.

• Pension and Annuity Plans: Payers of pensions and annuities, both public and private, that maintain an office or transact business in Connecticut, are required to notify Connecticut resident recipients of the availability of Connecticut income tax withholding and to withhold Connecticut income tax from payments if the Connecticut resident recipient submits a request in writing. This requirement applies to all pension and annuity payments from qualified or nonqualified plans, including lump sum distributions, whether or not payments are made from a Connecticut location.
  
  Payers must provide recipients with Form CT-W4P, Withholding Certificate for Pension or Annuity Payments (or a reasonable facsimile). A written request for withholding (Form CT-W4P or a written request providing the same information) must be on file with the payer before withholding begins. The request to deduct and withhold Connecticut income tax must be made in specific whole dollar amounts. 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.
  
  The written request for withholding or a request for a change in the amount to be withheld takes effect with the first payment made on or after the date which occurs:

• 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.
  
  Gambling winnings include both cash and noncash winnings. The value of noncash winnings is their fair market value.
  
  Any person making payments of gambling winnings that are subject to Connecticut income tax withholding and who is not otherwise required to register with DRS, must register by filing a Form REG-1, Application for Tax Registration Number. (See How To Register for Withholding Tax.)
  
  Connecticut income tax is to be deducted and withheld at a flat rate of 4.5%, without allowance for exemption, and is computed on the same amount that is subject to withholding for federal income tax purposes. Where the winnings are a noncash prize, the payer of the prize must collect the required withholding, in cash, from the winner before awarding the noncash prize.
  
  In general, payers will follow the instructions in the section entitled How To Report and Remit Taxes Withheld, except as follows:

PROFESSIONAL ATHLETES AND ENTERTAINERS

Compensation for personal services performed in Connecticut by a professional athlete or entertainer, paid in cash or otherwise, in connection with sporting events or in connection with the preparation or presentation of entertainment, whether as a participant, performer or otherwise, is subject to Connecticut income tax withholding. The person making payment to the athlete or entertainer, or to the athlete or entertainer’s agent for rendering such services, is the employer.

A person whose services are covered under this section is treated as an employee for Connecticut income tax purposes, whether or not such person is considered an employee for federal withholding tax purposes.

For further information on withholding for professional athletes and entertainers refer to PS 96(1), Income Tax Withholding for Athletes and Entertainers.

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WHAT PAYMENTS ARE NOT SUBJECT TO CONNECTICUT INCOME TAX WITHHOLDING?

In general, income which is not subject to federal income tax withholding is not subject to Connecticut income tax withholding.

PAYMENTS NOT SUBJECT TO FEDERAL INCOME TAX WITHHOLDING

Other than the exceptions noted in the previous section, Connecticut income tax withholding is not required on any compensation paid to an employee if the compensation is not subject to federal income tax withholding. Employers should consult the Internal Revenue Service Circular E, Employer’s Tax Guide, to determine federal income tax withholding rules for specific types of income.

SELF-EMPLOYED INDIVIDUALS

The owner of a business that has no employees is not required to register for Connecticut income tax withholding. The owner of a business, other than the sole shareholder of an S corporation, is not considered an employee for federal or Connecticut income tax withholding purposes.

Exemption from Connecticut income tax withholding does not exempt the income from Connecticut income tax. The recipient of taxable income that is not subject to Connecticut income tax withholding is required to pay estimated taxes if the recipient’s Connecticut taxable income meets the minimum filing requirement. For further information, refer to IP 92(5.7), Estimated Connecticut Income Taxes.

INTERSTATE COMMERCE

Compensation paid by interstate rail carriers, interstate motor carriers and interstate motor private carriers to a nonresident employee who perform regularly assigned duties in two or more states is not subject to Connecticut income tax withholding. The compensation does not constitute income derived from Connecticut sources even though the employee performed services in Connecticut. However, such compensation constitutes income derived from sources within the employee’s state of residence.

INTERSTATE AIR CARRIERS

Compensation paid by an interstate air carrier to a nonresident employee who performs regularly assigned duties on an aircraft in two or more states constitutes income derived from sources within the employee’s state of residence, and in the state in which the employee earns more than 50% of such compensation. An employee is deemed to have earned more than 50% of his or her compensation in Connecticut when the employee’s scheduled flight time in Connecticut is more than 50% of the employee’s total scheduled flight time in the calendar year. If this is the case, refer to Nonresident Wages Subject to Connecticut Income Tax Withholding.

NONRESIDENT SEAMAN

A nonresident seaman’s wages attributable to employment on a ship which enters a Connecticut port for the purpose of foreign or interstate trade is not subject to Connecticut income tax withholding.

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WAGES PAID BY THE UNITED STATES TO MEMBERS OF THE ARMED FORCES

Payments made by the United States to nonresident military personnel stationed or performing services for the United States armed forces in Connecticut are not subject to Connecticut income tax withholding. In general, payments made by the United States to military personnel who are Connecticut residents or whose domicile was Connecticut when they entered the military, regardless of where they are stationed, are subject to Connecticut income tax withholding. Certain individuals, however, may be entitled to claim exemption from the tax. IP 92(2.4), Connecticut Income Tax Information for Military Personnel and Veterans, lists the criteria which must be met in order to claim exemption from withholding.

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WITHHOLDING FOR MILITARY RETIREES

Connecticut residents who are retired from the regular and reserve components of the Uniformed Services are allowed to request, in writing, that the Uniformed Services withhold Connecticut income tax from their monthly retired pay. The term Uniformed Services refers to the Army, Navy, Air Force, Marine Corps, Coast Guard, commissioned corps of the Public Health Service, and commissioned corps of the National Oceanic and Atmospheric Administration.

A member may request withholding by completing Form CT-W4P and submitting it to the retired pay office of his or her Uniformed Service. The amount to be withheld from each payment must be an even dollar amount but not less than $10.

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HOW TO WITHHOLD CONNECTICUT INCOME TAX

Withholding is determined using the current Connecticut Income Tax Withholding Tables and Calculation Rules. To determine how much Connecticut income tax to withhold from each employee’s wages, employers should refer to the most recently completed Form CT-W4 on file for each employee.

EMPLOYEE'S WITHHOLDING OR EXEMPTION CERTIFICATE

Employers must obtain a completed copy of Form CT-W4 from each new employee when hired. The form takes effect as of the first payroll period ending or the first payment of wages made on or after the date Form CT-W4 is furnished by the employee. Unless the employee claims exemption, Form CT-W4 remains in effect until the employee provides the employer with a new one.

Photocopy Form CT-W4 as needed.

• Employees claiming exemption: Employers are required to obtain a new Form CT-W4 on or before February 15 from each employee who claimed exemption from withholding in the prior year. If a new Form CT-W4 for the current year is not provided by the employee, begin withholding at a flat rate of 4.5% (.045), without allowance for exemption, on February 16. The Form CT-W4 previously given to you claiming exemption has now expired.

• Reporting certain employees to the DRS: Generally, employers should not send copies of Form CT-W4 to DRS. However, employers must send copies of Forms CT-W4 from employees claiming exemption from Connecticut income tax withholding, if:

• Reporting new employees to the Department of Labor: Conn. Gen. Stat. §31-254(b), as amended by 1997 Conn. Pub. Acts 4, §2 (June 18 Spec. Sess.) requires employers with offices in Connecticut or transacting business in Connecticut to report the name, address and social security number of new employees to the Department of Labor. Each new employee's Form CT-W4 must be sent to the Department of Labor within 20 days from the date of hire to assist in the enforcement of child support obligations. The Department of Labor may use information reported on this form in a manner consistent with its governmental powers and duties. Additional instructions for submitting copies of this form are contained on Form CT-W4.

DETERMINING HOW MUCH TO WITHHOLD FROM EMPLOYEES

The amount of income tax to be withheld from an employee’s wages depends on: (1) payroll period, (2) gross taxable wages, (3) filing status and (4) additions or reductions to withholding requested by the employee on Form CT-W4.

• Employees who do not return a completed Form CT-W4: Employers must withhold at a flat rate of 4.5% (.045), without allowance for exemption, on the gross taxable wages of employees who do not return a completed Form CT-W4.

HOW TO USE THE WITHHOLDING TABLES

Use these steps when calculating withholding from the Withholding Tables:

1. Select the table which is the same as your payroll period (weekly, monthly, etc.).

2. Use the columns on the left side of the table. Find the line on which your employee’s gross taxable wages are included. (Gross taxable wages are wages subject to federal income tax withholding.)

3. Select the "Withholding Amount" column on the right side of the table which corresponds with the filing status selected by your employee on Form CT-W4 (Status A, B, C, D).

4. Add to the "Withholding Amount" the amount, if any, on Line 2 of Form CT-W4.

5. Subtract from the "Withholding Amount" the amount, if any, on Line 3 of Form CT-W4. The amount on Line 3 of Form CT-W4 cannot exceed the total withholding amount.

WITHHOLDING FOR DAILY/MISCELLANEOUS AMOUNTS

For those employees who receive one-time or miscellaneous payments, the employer must withhold at a flat rate of 4.5% (.045) without allowance for exemption. For withholding rules on supplemental compensation. See Supplemental Compensation.

DETERMINING HOW MUCH TO WITHHOLD FROM NONRESIDENT EMPLOYEES WHO WORK PARTLY WITHIN AND PARTLY OUTSIDE CONNECTICUT

A nonresident employee who performs services partly within and partly outside Connecticut is subject to Connecticut income tax only on the portion of wages attributable to services performed within Connecticut.

For Connecticut income tax withholding purposes, however, an employer must withhold Connecticut income tax on all wages paid to the employee unless the employer can properly allocate the wages attributable to services performed in Connecticut by means of one of the following:

• The nonresident employee files with his or her employer a Form CT-W4NA, Employee’s Withholding or Exemption Certificate - Nonresident Apportionment, identifying the portion of wages subject to Connecticut income tax.

• The employer maintains accurate current records to determine the amount of wages paid for such services performed within Connecticut.

Employers who receive Form CT-W4NA or who maintain accurate current records from nonresident employees will calculate the amount of Connecticut income tax to be withheld for services performed within Connecticut as follows:

1. Determine the total "Withholding Amount" on all wages paid to the employee using the procedure in Determining How Much to Withhold from Employees.

2. Multiply that total "Withholding Amount" by the percentage from Form CT-W4NA that certifies the estimated portion of services performed in Connecticut during the year (when the employer has a completed Form CT-W4NA on file) or by the percentage representing wages paid for such services performed within Connecticut, divided by the nonresident’s total wages (when the employer maintains accurate and current records).

The following examples refer to the Withholding Tables, Effective July 1, 1998.

Photocopy Form CT-W4NA as needed.

SUPPLEMENTAL COMPENSATION

Withholding rules for supplemental compensation (such as bonuses, commissions, overtime pay, sales awards, etc.) depend on when the supplemental compensation is paid.

• supplemental compensation paid at the same time as regular wages: When supplemental compensation is paid at the same time as regular wages, the tax to be withheld should be determined as if the total of the supplemental and regular wages were a single payment for the regular payroll period.

Example: Mary worked 5 hours overtime during the pay period. In her paycheck, Mary’s employer includes her regular pay and her overtime pay. Her employer will determine the amount to be withheld based upon the total of the regular pay plus the overtime.

• Supplemental compensation paid at a different time than regular wages: If supplemental compensation is paid at a different time than regular wages, the method of withholding depends on whether the employer withheld income tax from the employee’s regular wages.

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HOW TO REPORT AND REMIT TAXES WITHHELD

Employers and payers who are registered with DRS for Connecticut income tax withholding will receive the Employer’s Withholding Remittance Coupon Book containing the reporting forms. Each of the forms included in the coupon book is a machine readable document which is personalized with the employer’s name, address, Connecticut tax registration number and federal employer identification number. Only the original coupon should be submitted.

WITHHOLDING PAYMENT COUPON

Form CT-WH, Connecticut Withholding Tax Payment, is to be mailed to DRS with each Connecticut income tax withholding payment. Due dates for payment of Connecticut income tax withholding for wage and nonpayroll amounts are the same as the due dates for the employer’s deposits of federal income tax withholding. Do not file Form CT-WH if no payment is due.

However, if an employer chooses to deposit withheld federal income tax more frequently than is required under federal law, the employer must also pay withheld Connecticut income tax at the same time.

If the tax liability was deducted and withheld during one quarter and paid over in another quarter, enter the number for the quarter in which the tax liability was deducted and withheld. For example, if the tax liability was deducted and withheld in March and paid over in April, enter "1" on Line 1 of Form CT-WH.

• Less Than $500 Quarterly: If an employer is required to withhold less than $500 of Connecticut income tax during a calendar quarter, Form CT-WH does not have to be filed. The tax may be paid quarterly with Form CT-941. However, if you are unsure whether you will be required to withhold less than $500 of Connecticut income tax, remit the payments under the appropriate rules so that you will not be subject to interest and late payment penalties.

QUARTERLY RECONCILIATION

All employers and payers (except seasonal, annual, agricultural and household employer filers) who are registered for Connecticut income tax withholding must file Form CT-941, even if no tax is due or has been withheld for that quarter. Due dates are: First Quarter, April 30; Second Quarter, July 31; Third Quarter, October 31; Fourth Quarter, January 31. This requirement applies to all employers and payers even if they are not required to file a quarterly reconciliation for federal income tax withholding purposes. Form CT-941 is located in the back of the Employer's Withholding Remittance Coupon Book.

An employer that makes timely withholding payments and owes no additional withholding for the quarter has 10 days after the normal due date to file Form CT-941.

• Payers of Nonpayroll Amounts: A payer who is permitted to file annually using federal Form 945 and who pays no wage income may obtain permission from the Department of Revenue Services to file one Form CT-941 due January 31. (See Payers of Nonpayroll Amounts for information on requesting annual filer status.) If permission to become an annual filer is not granted, payers must continue to file Form CT-941 each quarter (even if no tax is withheld) as long as they remain registered for Connecticut income tax withholding.
  
  DRS does not use a form that is similar to federal Form 945. Therefore, report wage and nonpayroll amounts on Form CT-941.

• Agricultural Employers: Agricultural employers who file federal Form 943 and employ farm workers only may obtain permission from DRS to file one Form CT-941, due January 31, reporting annual wages and Connecticut income tax withholding for farm workers. (See Agricultural Employers for information on how to request annual filer status.)

• Seasonal Employers: Seasonal employers must file Form CT-941, for any quarter in which they are listed as active. (For further information on requesting seasonal filer status see, Seasonal Employers.) If permission to become a seasonal filer is not granted, employers must continue to file Form CT-941 each quarter (even if no tax is withheld) as long as they remain registered for Connecticut income tax withholding.

• Household Employers: Household employers who have voluntarily registered with DRS are required, on or before April 15 of the following calendar year, to file just one Form CT-941 and pay over all the Connecticut income tax withholding for the previous calendar year. See SN 96(8), 1996 Legislative Changes Concerning "Nanny Tax" Withholding.

AMENDED QUARTERLY RECONCILIATION

If an error was made by the employer on a previously filed Form CT-941, an amended return must be filed. Use Form CT-941X, Amended Connecticut Quarterly Reconciliation of Withholding, to amend a Form CT-941 for any calendar quarter ending on or after December 31, 1995. Use Form CT-941X(B) to amend a Form CT-941 for any calendar quarter ending on or before September 30, 1995.

WAGE AND TAX STATEMENT

Federal Form W-2, Wage and Tax Statement, showing the correct amount of Connecticut wages paid by the employer to the employee and the correct amount of Connecticut income tax withheld in the calendar year, must be given by employers to their employees on or before January 31.

Complete the state information in boxes 16, 17 and 18 of federal form W-2 for the calendar year. In box 16 enter CT, the two letter state code for Connecticut and the Connecticut tax registration number from the Employers Withholding Remittance Coupon book. Enter in box 17 the total wages paid to a Connecticut resident or the wages attributable to services performed in Connecticut of a nonresident. Enter in box 18 the total Connecticut income tax withheld.

ANNUAL RECONCILIATION

Form CT-W3, is due from all employers on or before the last day of February. No payment is to be made with this form. Employers must file every "state copy" of federal Form W-2 (copy 1 of the optional six-part federal Form W-2 or equivalent) reporting Connecticut wages paid during the calendar year with the annual reconciliation, even if no Connecticut income tax was withheld.

• W-2 Magnetic Media Filing: An employer who is required by the Internal Revenue Service to file copies of federal Form W-2 on magnetic media must file these forms on magnetic media with the DRS. However, an employer who files 24 or fewer Forms W-2 with DRS may be excused from the magnetic media filing requirements without obtaining a waiver. Magnetic media reporting specifications for federal Form W-2 are contained in IP 92(10.5), Annual Wage Information On Magnetic Media, available from the DRS Forms Unit.

Form CT-1096, is due on or before the last day of February. No payment is to be made with this form.

If you are required to file federal Form 1096, you must file a Form CT-1096 with every "state copy" of the following:

1. federal Form W-2G, for winnings paid to resident individuals, even if no Connecticut income tax was withheld;

2. federal Form 1099-MISC, for payments made to resident individuals or, if the payments relate to services performed wholly or partly in Connecticut, payments to nonresident individuals, even if no Connecticut income tax was withheld;

3. federal Form 1099-R, only if Connecticut income tax was withheld;

4. federal Form 1099-S, reporting real estate transactions in Connecticut.

• Form 1099 and W-2G Magnetic Media Filing: A payer who is required by the Internal Revenue Service to file copies of federal Form 1099 and/or Form W-2G on magnetic media must file these forms on magnetic media with DRS. However, a payer who files 24 or fewer Forms 1099 or Forms W-2G with DRS may be excused from the magnetic media filing requirements for that particular type of information return without obtaining a waiver. Magnetic media reporting specifications for federal Form 1099 and/or Form W-2G are contained in IP 93(5.4), Informational Returns on Magnetic Media, available from the DRS Forms Unit.

• Request for Extended Due Date: Employers may request an extension to file Form CT-W3 and/or Form CT-1096, by filing Form CT-8809, Request for Extension of Time to File Informational Returns Request for Extension of Time to File Informational Returns, on or before the last day of February.

AMENDED ANNUAL RECONCILIATIONS

If an error was made by the employer or payer of a previously filed Form CT-W3 or Form CT-1096, respectively, an amended return must be filed. Employers and payers should write "Amended" at the top of Form CT-W3 or Form CT-1096 for the appropriate year, and attach any "state copy" of federal Form W-2C or corrected federal Forms 1099-MISC, 1099-R, 1099-S or W2-G.

CORRECTIONS TO YOUR MAGNETIC MEDIA OR W-2 INFORMATION RETURNS

DRS does not accept magnetic filing of federal Form W-2C. If there is an error in your magnetic media or Form W-2 information returns, correct the file and replace the entire file. Complete Form CT-6559, Transmitter Report, and check the box indicating that it is a replacement file. Also file an amended Form CT-W3 or Form CT-1096 and write "Amended" at the top of the form.

CORRECTION/REORDER FORM

Form CTC, Withholding Correction/Reorder Form, allows employers to make corrections to taxpayer identification information preprinted in the coupon book or to order an additional coupon book for the current calendar year. Please allow a minimum of four weeks when ordering additional coupon books.

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PAYMENT BY ELECTRONIC FUNDS TRANSFER

Taxpayers whose 12-month liability for a particular tax exceeded $100,000 must pay that tax for the next 12-month period by electronic funds transfer.

DRS will issue a notice to payers who are required to pay by electronic funds transfer.

Although the Department reviews annually whether a taxpayer must continue to pay withholding tax by electronic funds transfer, any taxpayer that has previously been issued notice to pay withholding tax by electronic funds transfer must continue to pay by electronic funds transfer until the Department issues notice to such taxpayer that payment by electronic funds transfer by the taxpayer is no longer required. (See SN 96(5), 1996 Legislative Changes Affecting Payment of Connecticut Taxes by Electronic Funds Transfer, and IP 93(2.1), Q & A on Paying Taxes By Electronic Funds Transfer.) For further information on payment by electronic funds transfer, call 860-297-4973.

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EMPLOYER’S LIABILITY FOR TAXES WITHHELD

An employer is liable for the amount of the Connecticut income tax which the employer is required to withhold. For purposes of assessment and collection, amounts required to be withheld and paid over to DRS (and any penalties and interest) are considered to be the liability of the employer (as withholding agent) under the law. The employer remains liable even if a third party is withholding on the employer’s behalf.

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PENALTIES AND INTEREST

Employers who fail to comply with the requirements to withhold Connecticut income tax are subject to penalties, including:

LATE PAYMENT

The penalty for late payment or underpayment of the tax due is 10% (.10) of such amount due on all returns including Form CT-WH.

LATE FILING PENALTY

If no tax is due, the penalty for late filing of a return is $50. (This late filing penalty does not apply to Form CT-WH.)

INTEREST

If you are filing a late or amended return, interest is computed at the rate of 1% (.01) per month or fraction thereof from the due date until the date of payment. Interest is based on the amount which should have been remitted on time.

REQUIRED INFORMATIONAL RETURNS

A penalty of $5 per statement (up to a total of $2,000 per calendar year) is imposed for failure to provide federal Form W-2 and required Forms 1099-MISC, 1099-R, 1099-S and W-2G to each employee or payee and a copy thereof to DRS (unless due to reasonable cause).

WILLFUL EVASION

A penalty equal to the total amount of the tax evaded, not collected or not paid over is imposed on any responsible person for the willful failure of an employer to collect or truthfully account for income tax, or for willfully attempting to evade the tax.

FRAUD

In addition to any other penalty that may be imposed, a civil penalty of not more than $1,000 is imposed where, with fraudulent intent, an employer fails to pay, deduct or withhold and pay tax, or to make or sign any return or supply information.

CRIMINAL PENALTIES

Any person who willfully fails to pay tax, file a return, keep records, or supply information is guilty of a misdemeanor. A person who willfully files with DRS any document known to be fraudulent or false in any material manner is guilty of a felony.

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HOW TO ADVISE EMPLOYEES TO HAVE ENOUGH TAX WITHHELD

Remind employees to check their withholding. If an employee will owe more than $500 in Connecticut income tax over and above what has been withheld, he or she may be required to make estimated income tax payments and may be liable for an addition to tax. Advise employees to check their Connecticut income tax withholding by using IP 92(9.5), Is My Connecticut Withholding Correct?, which may be obtained from the DRS Forms Unit.

Two-earner couples may also refer to the Supplemental Table of Form CT-W4.

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WHAT RECORDS TO KEEP

An employer must maintain a current accurate record of all persons from whom tax is withheld. DRS has the authority to inspect an employer’s records at any time. Records should contain all applicable information listed below:

• Amounts and dates of all payments subject to withholding tax.

• Names, addresses, occupations and social security numbers of persons receiving such payments.

• Periods of employment, including periods during which compensation is paid while an employee is absent due to sickness or injury.

• Amounts paid by pay period.

• Copies of payment coupons, quarterly and annual returns, and statements filed with DRS and IRS.

• Federal Form W-4, Federal Employee Withholding Allowance Certificate.

• Form CT-W4, Employee’s Withholding or Exemption Certificate.

• Form CT-W4NA, Employee’s Withholding or Exemption Certificate C Nonresident Apportionment.

• Form CT-W4P, Withholding Certificate for Pension or Annuity Payments.

Records should be kept for at least four years after the date the tax becomes due or the date the tax is paid, whichever is later. However, a current, accurate copy of Form CT-W4, Form CT-W4NA or Form CT-W4P must be on file at all times.

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HOW TO CANCEL REGISTRATION FOR WITHHOLDING CONNECTICUT INCOME TAX

If an employer goes out of business or permanently stops paying wages, the employer should notify DRS immediately by filing Form CT-941 for the current quarter. Check the box indicating that the employer no longer has employees and enter the last payroll date on the line provided on Form CT-941 or send written notification to:

Comply with all filing requirements for the calendar year as explained in How To Report and Remit Taxes Withheld.

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EFFECT OF THIS DOCUMENT

An Informational Publication is a document that addresses issues frequently raised by taxpayers, usually in a question-and-answer format. It is less technical in nature than a Policy Statement, but may be referred to by individual taxpayers for guidance.

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Frequently Asked Withholding Questions

COMPARISON OF FEDERAL AND CONNECTICUT FILING RULES
(for most commonly filed withholding forms)