Form An 2011 - Additional Guidance Regarding Withholding Calculation Rules For Supplemental Compensation And Use Of Newly Issued Form Ct-W4t

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STATE OF CONNECTICUT
AN 2011(6)
DEPARTMENT OF REVENUE SERVICES
25 Sigourney Street Ste 2
Hartford CT 06106-5032
ANNOUNCEMENT
Additional Guidance Regarding Withholding Calculation Rules for
Supplemental Compensation and Use of Newly Issued Form CT-W4T
Purpose: This Announcement provides additional
purposes.
The
information
contained
in
this
information to Connecticut taxpayers regarding
Announcement is intended to provide employees who
calculation rules for supplemental compensation in
are faced with this issue a mechanism to both
determine and have the proper amount of Connecticut
light of the “catch-up” income tax withholding
requirements in effect for 2011. This Announcement
income tax withheld.
also includes Form CT-W4T, 2011 Withholding
IMPORTANT NOTE: Please be advised that not
Certificate, which can be used by employees who
all employers, payroll and software companies,
receive supplemental compensation after the date of
and
potentially
impacted
taxpayers
are
issuance of this Announcement as well as by
experiencing these problems. Therefore, before
making any of the changes or following any of the
taxpayers whose Connecticut income tax withholding
steps set forth in this publication, employees are
has otherwise been impacted by issues related to the
urged to contact their payroll office or department.
implementation of the “catch-up” withholding rules.
Moreover, the Department also wants to make
clear to employees who are impacted by these
issues that they are not required to take any
Effective Date: Effective upon issuance.
action. As stated above, the purpose of this
Announcement is to provide those employees with
the
information
necessary
to
adjust
their
Connecticut income tax withholding if they choose
Background:
By way of brief background, the
to do so.
General Assembly made changes to the Connecticut
income tax that are effective as of January 1 of this
year. In recognition of the retroactive nature of these
Method to Determine Proper Amount of
changes, the General Assembly also passed a
Connecticut Withholding if You Receive
provision requiring that the Department issue new
Supplemental Compensation: As explained
income tax withholding calculation rules that take
above, if you receive supplemental compensation
into account these changes. In simple terms, the new
(e.g., bonuses and overtime) after August 1, 2011 you
withholding calculation rules spread any tax
increases over the remainder of calendar year 2011
may be at risk to be over withheld for Connecticut
thereby allowing taxpayers to “catch-up” with
income tax purposes. To this end, if you have verified
increases that were effective back to January 1.
with your employer that you either have been or are
likely to be over withheld, the Department has
The Department is aware that employers, payroll and
developed a methodology that is intended to help you
software companies, and taxpayers have encountered
correct or avoid this situation. The methodology is set
issues in the implementation of the “catch-up”
forth in the Projected Withholding Worksheet that is
withholding requirements that were enacted this past
attached to this Announcement.
legislative session. Specifically, companies are
having
difficulty
separating
supplemental
compensation (e.g., bonuses and overtime) from
Use of Form CT-W4T: As noted above, the
regular wages when calculating the required “catch-
Department has developed and issued Form
up” withholding. As a result, employees who receive
CT-W4T. Form CT-W4T is intended to be used by
supplemental compensation after August 1, 2011 will
those taxpayers whose Connecticut income tax
likely be over withheld for Connecticut income tax
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