Effective January 1, 2018, payers that maintain an office or transact business in Connecticut and make distributions of taxable pension or annuities to a resident individual are required to deduct and withhold income tax from such distributions. Taxable pension or annuity distributions subject to withholding include distributions from the following:
  • An employer pension;
  • An annuity;
  • A profit sharing plan;
  • A stock bonus;
  • A deferred compensation plan;
  • An individual retirement arrangement;
  • An endowment; and
  • A life insurance contract.

Payers must provide Connecticut resident recipients of pension or annuity payments with Form CT-W4P, Withholding Certificate for Pension or Annuity Payments.  Additional information for your recipients is available in AN 2017(11), Revised Form CT-W4P for Connecticut Resident Recipients of Pension and Annuity Distributions.

Periodic Payments: Payers are required to calculate the amount of withholding using the same method that is used by employers when employers determine the amount to withhold from wages. Therefore, payers of periodic payments must use the current Income Tax Withholding Tables or TPG-211, Withholding Calculation Rules, along with the recipient’s most recently completed Form CT-W4P.

Nonperiodic Payments: Payers are required to withhold 6.99% unless the payee completes Form CT-W4P and claims exemption from withholding or specifies a dollar amount to withhold.

For additional information see Informational Publication 2018(8), Connecticut Tax Guide for Payers of Nonpayroll Amounts.