Connecticut Withholding laws & HR compliance analysis

Connecticut Withholding: What you need to know

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.
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Employers required to withhold tax must register by completing Form REG-1, Business Taxes Registration Application.
Employers must obtain a Form CT-W4 from each new employee when hired and by February 15 annually from each employee who claimed exemption in the prior year. To determine how much to withhold, use the employee’s most recent CT-W4 along with the state’s current income tax withholding tables and calculation rules. If an employee fails to provide a completed CT-W4, the employer must withhold at a flat rate of 6.99 percent, without allowance for exemption.
All withholding filings and payments must be made electronically. Each calendar year, the Department of Revenue Services (DRS) will class employers as weekly, monthly, or quarterly remitters. Most new employers are classified as monthly remitters. Employers not required to deduct and withhold any Connecticut income tax for all 4 quarters of a calendar year may request annual filer status.
The frequency of an employer’s filing and payment obligations in a given ...

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