Any employer that maintains an office or transacts business in Connecticut must withhold state income tax. Connecticut generally follows federal law in determining which income is subject to withholding. Wages subject to withholding include fringe benefits, supplemental compensation, “golden parachutes,” sick pay, moving expenses, and severance pay.
All wages of a Connecticut resident are subject to withholding even if the resident works outside the state, subject to reduction or proration based on the amount withheld by other states. Wages of a nonresident are subject to withholding if the wages are paid for services rendered in Connecticut.
Beginning in 2018, tax must be withheld from payments of taxable pensions or annuity distributions. This applies to distributions from an employer pension, an annuity, a profit-sharing plan, a stock bonus, a deferred compensation plan, an individual retirement arrangement, an endowment, or a life insurance contract.