Posted on July 29, 2011

Connecticut Withholding Tax Changes Effective August 1

Connecticut has enacted legislation that makes significant changes to the income tax withholding rates. It is effective for payrolls with a check date of August 1, 2011 and is retroactive to January 1, 2011.

The employer must abide by the new withholding tables and specific requirements described below (particularly Table E, Additional Recapture Amount) even if it results in a zero net check for the employee. If the employer does not abide by these new requirements the employer will be held liable for the amount of the Connecticut income tax that was required to be withheld.

Paycor updated the withholding tables and the new withholding requirements specific to 2011 the evening of July 27 for any payrolls with a check date of August 1, 2011 or later.

Items included in the revised withholding tables are listed below:
* The number of tax brackets and corresponding rates have increased from three to six:
**** Three of the tax rates remain the same (3.0, 5 and 5.5), but the taxable wage brackets for those rates have changed. * The three new tax rates are 6, 6.5, and 6.7
**** Details for the wage brackets that correspond to these 6 rates can be found in the new withholding tables.

* Two new tax tables have been added, effective for the remainder of tax year 2011 only:
**** Table D – 3% Phase Out
**** The 3% tax rate is phased out for the taxpayers with Connecticut adjusted gross income over specified amounts.
**** Table E – Additional Recapture Amount
**** Catch up employee withholding for the current tax year as the income tax changes are retroactive back to 1/1/2011. Additional tax provisions require a recapture of tax from taxpayers over certain income brackets.

Along with the release of the new withholding tax tables, Connecticut also released Informational Publication IP2011 (10.1) with some specific requirements pertaining to these new tables.

Beginning for payrolls dated 1/1/2012, the two additional tables that have been added and the specific requirements pertaining to these tables will no longer be applicable. The programming that was required for these tables will also expire.

If you have any questions please email Vicki Orwig in Paycor’s tax department.