DRS: IP 2004(1), Connecticut Income Tax Withholding Requirements for Connecticut Employees

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 
 
This Informational Publication has been replaced by IP 2005(1)

IP 2004(1)

Connecticut Income Tax
Withholding Requirements for Connecticut Employees

Effective January 1, 2004 through December 31, 2004


Table of Contents

Why Should I Check My Withholding?

When Should I Check My Withholding?

How Do I Check My Withholding?

What If I Have Nonwage Income or Income Not Subject to Withholding?

How Do I Increase My Withholding?

How Do I Decrease My Withholding?

Am I Exempt from Connecticut Withholding?

When Will My New Form CT-W4 Go Into Effect?

2004 Income Tax Worksheet Instructions 

Worksheet 1

Worksheet 2

Table A- Exemptions

Table B- Connecticut Income Tax

Table C- Personal Tax Credits

Form CT-1040 or Form CT-1040NR/PY, Schedule 1- Modifications to Federal Adjusted Gross Income


PURPOSE

The purpose of this publication is to assist you in checking your Connecticut income tax withholding and, if necessary, adjusting your withholding. You should check your withholding once a year or if your tax situation changes to ensure you will have the correct amount of Connecticut income tax withheld from your wages.


WHY SHOULD I CHECK MY WITHHOLDING?

In general, your employer withholds Connecticut income tax from your wages according to the information you provided in completing Form CT-W4, Employee’s Withholding Certificate. If the information you provided is no longer accurate, your employer may be withholding too much or too little Connecticut income tax from your wages. If too much tax is withheld, you lose the use of money that will not be returned to you until you file a return showing you overpaid the tax. If too little tax is withheld, you may be subject to interest in addition to any tax due (even if you file your return and pay the tax you report on time). You may adjust your withholding at any time by completing and filing a new Form CT-W4 with your employer.


WHEN SHOULD I CHECK MY WITHHOLDING?

You should check your withholding early in the year and compare the total tax to be withheld from your pay for the year with what you expect your Connecticut income tax liability will be for the year. You should check your withholding again during the year if the tax laws change or if any of the following apply to you:

Note: Spouses who are both employed and select Withholding Code "A" on Form CT-W4 may refer to the Supplemental Table for a quick and easy guide on how to adjust their withholding. For a more precise calculation, follow the directions provided in the following sections.


HOW DO I CHECK MY WITHHOLDING?

You will need a pay statement for a full pay period showing the amount of Connecticut income tax withheld and a copy of your most recently filed Form CT-W4. (Your employer has your Form CT-W4 on file and can provide you with a copy.) Once you have these documents:

Refer to Line 1 of your most recently filed Form CT-W4 to review your current Withholding Code.

Read all instructions for Form CT-W4 carefully to ensure your withholding is correct. File this form with your employer. (It is not necessary to go on to "2" below.)

Complete Worksheet 1 to estimate your total 2004 Connecticut income tax liability. Then complete Worksheet 2 to compare your projected total 2004 Connecticut income tax liability with your projected 2004 Connecticut income tax withholding.

Married Filing Jointly

If you are married filing jointly, you must combine your income with your spouse’s income and combine your withholding with your spouse’s withholding when completing the worksheets.

New Hires

Contact your employer's payroll department to obtain the amount of Connecticut income tax to be withheld from your wages based on your Withholding Code.


WHAT IF I HAVE NONWAGE INCOME OR INCOME NOT SUBJECT TO WITHHOLDING? 

If you have nonwage income or income that is not subject to withholding, you may wish to make estimated income tax payments instead of increasing your withholding. Informational Publication 2003(36), Estimated Connecticut Income Taxes, explains this option. Estimated income tax payments are made using Form CT-1040ES, 2004 Estimated Connecticut Income Tax Payment Coupon For Individuals

CAUTION

If you owe more than $500 in Connecticut income tax after subtracting Connecticut income tax withheld, you may be subject to interest on the underpaid amount. Generally, if you do not prepay (in timely estimated tax payments or withholding, or both) the lesser of 100% of the income tax shown on your 2003 Connecticut income tax return, (if you filed a 2003 Connecticut income tax return that covered a 12 month period), or 90% of the income tax shown on your 2004 Connecticut income tax return, you may owe interest at the rate of 1% per month or fraction of a month of the underpaid amount. To avoid interest charges, be sure your withholding is as accurate as possible.

 

HOW DO I INCREASE MY WITHHOLDING?

To increase your withholding, you must complete a new Form CT-W4. Before completing Form CT-W4, you should complete Worksheets 1 and 2 on to help you determine if you need to increase your withholding. Then complete the following steps to fill out your Form CT-W4.

Enter your Withholding Code on Line 1 of the new Form CT-W4;

Enter the amount from Line 8 of Worksheet 2 on Line 2 of the new Form CT-W4;

Enter all other required information on Form CT-W4; and

Give the new Form CT-W4 to your employer. (Keep a copy for yourself.)
 
Example 1: If your previously filed Form CT-W4 showed $3.00 on Line 2, and Line 8 of Worksheet 2 shows you should increase your current withholding by $5.00, enter $8.00 on Line 2 of your new Form CT-W4.

More Than One Job

If you have more than one job (or you are married filing jointly and your spouse also works), you can adjust your withholding for one or more of the jobs. You can apply the amount on Line 7 of Worksheet 2 to only one job or divide it between the jobs any way you wish. Divide the amount you apply to a job by the number of paydays remaining in 2004 for that job. This will give you the additional amount to enter on Line 2 (or Line 3, for a reduced amount) of the new Form CT-W4 you will file for that job.
 

HOW DO I DECREASE MY WITHHOLDING?

Important: Before decreasing the amount to be withheld, be sure you have enough Connecticut income tax withheld to meet your projected Connecticut income tax liability. Underwithholding may result in interest charges. See Informational Publication 2003(36).

To decrease your withholding, you must complete a new Form CT-W4. Before completing Form CT-W4, you should complete Worksheets 1 and 2 to help you determine if you need to decrease your withholding. Then complete the following steps to fill out your Form CT-W4.

Enter your Withholding Code on Line 1 of the new Form CT-W4;

Enter the amount from Line 8 of Worksheet 2 on Line 3 of the new Form CT-W4;

Enter all other required information on Form CT-W4; and

Give the new Form CT-W4 to your employer. (Keep a copy for yourself.)
 
Example 2: If your previously filed Form CT-W4 showed $3.00 on Line 2, and Line 8 of Worksheet 2 shows you should decrease your current withholding by $5.00, enter $2.00 on Line 3 of your new Form CT-W4.
 
If too much Connecticut income tax is withheld in 2004, your overpayment of Connecticut income tax may be refunded to you when you file your 2004 Connecticut income tax return.
 

Am I Exempt From Connecticut Withholding?

You are exempt from Connecticut withholding if you expect to have no Connecticut income tax liability for the taxable year. You will have no Connecticut income tax liability if your annual gross income is:

• $12,000 or less and you file as Married Filing Separately;

• $12,625 or less and you file as Single;

• $19,000 or less and you file as Head of Household; or

• $24,000 or less and you file as Married Filing Jointly.

Gross Income means all income received in the form of money, goods, property, and services not exempt from federal income tax and any additions to income required to be reported on Form CT-1040 or Form CT-1040NR/PY, Schedule 1, Modifications to Federal Adjusted Gross Income.

To claim exemption from Connecticut withholding, you must enter Withholding Code "E" on Form CT-W4, Line 1.
 

 
WHEN WILL MY NEW FORM CT-W4 GO INTO EFFECT?

If the change is for the current year, your employer must withhold on the basis of your new Form CT-W4 no later than the start of the first payroll period ending on or after the thirtieth day following the day on which you give your employer your new Form CT-W4. If the change is for next year, your new Form CT-W4 will not take effect until next year.


 
2004 Income Tax Worksheet 1 - Instructions

Line 1

Enter the amount of federal adjusted gross income you expect in 2004. You may use federal Form 1040ES, Estimated Tax for Individuals, as a worksheet to determine your federal adjusted gross income.

Line 2

Enter the total of your estimated allowable Connecticut additions. (See Form CT-1040 or Form CT-1040NR/PY, Schedule 1, Modifications to Federal Adjusted Gross Income, for information about allowable Connecticut modifications.)

Line 4

Enter the total of your estimated allowable Connecticut subtractions. (See Form CT-1040 or Form CT-1040NR/PY, Schedule 1, Modifications to Federal Adjusted Gross Income, for information about allowable Connecticut modifications.)

Line 5

Nonresidents and Part-Year Residents Only:
If your Connecticut source income is greater than your Connecticut adjusted gross income, enter your Connecticut source income on this line. (See the instructions to Form CT-1040NR/PY for more information on Connecticut source income.)

Line 6

To calculate your estimated Connecticut income tax, complete Lines 6a through 6f. Enter your Connecticut income tax on Line 6.

Line 7

Nonresidents and Part-Year Residents Only:
If your Connecticut source income is greater than or equal to your Connecticut adjusted gross income, enter 1.0000. If your Connecticut source income is less than your Connecticut adjusted gross income, complete the following calculation and enter the result on Line 7.

Connecticut Source Income
Connecticut Adjusted Gross Income   =  Line 7
(Line 5 of Worksheet 1)

Do not enter a number less than zero or greater than 1. If the result is less than zero, enter "0;" if greater than 1, enter 1.0000. Round to four decimal places.

Line 9

Residents and Part-Year Residents Only: Enter estimated allowable credit for income taxes paid to other jurisdictions. Enter "0" if not applicable. (See instructions for Form CT-1040 or Form CT-1040NR/PY, Credit for Income Taxes Paid to Qualifying Jurisdictions.)

Line 11

If you expect to owe federal alternative minimum tax in 2004, you may also owe Connecticut alternative minimum tax. Enter your estimated Connecticut alternative minimum tax liability. (See instructions for Form CT-6251, Connecticut Alternative Minimum Tax Return - Individuals.)

Line 13

Enter your estimated allowable adjusted net Connecticut minimum tax credit. If you are not entitled to a credit, or if you entered an amount on Line 11, enter "0." (See instructions for Form CT-8801, Credit for Prior Year's Connecticut Minimum Tax for Individuals, Trusts, and Estates.)

Line 14

        Subtract Line 13 from Line 12. Use this amount to complete Worksheet 2.


 Worksheet 1

1. Federal adjusted gross income (FAGI) you expect in 2004. (To determine this you may want to start with FAGI on your last year's return and add or subtract your expected changes.)

1.

 

2. Allowable Connecticut additions, if any  (See 2004 Income Tax Worksheet - Instructions)

2.  

3. Add Line 1 and Line 2

3.  

4. Allowable Connecticut subtractions, if any (See 2004 Income Tax Worksheet - Instructions)

4.  

5. Connecticut adjusted gross income. (Subtract Line 4 from Line 3) Nonresidents and Part-Year Residents: Enter your income from Connecticut sources if greater than your Connecticut adjusted gross income.

5.  

6. Connecticut income tax

a. Enter the amount from Line 5, above

6a.

b. Enter Personal Exemption (From Table A - Exemptions)

6b.

c. Connecticut Taxable Income (Subtract Line 6b from Line 6a - If less than zero, enter "0")

6c.

d. Connecticut Income Tax (From Table B - Connecticut Income Tax)

6d.

e. Enter Credit Percentage (From Table C - Personal Tax Credits)

6e.

f. Multiply the amount on Line 6d by the percentage on Line 6e

6f.

CONNECTICUT INCOME TAX (Subtract Line 6f from Line 6d)

6.  

7. Nonresidents and Part-Year Residents Only (See 2004 Income Tax Worksheet - Instructions)     Residents: Enter 1.0000

7.  

8. Multiply Line 7 by Line 6

8.  

9. Credit for income taxes paid to other jurisdictions (See 2004 Tax Income Worksheet - Instructions)

9.  

10. Subtract Line 9 from Line 8

10.  

11. Estimated Connecticut alternative minimum tax (See 2004 Tax Income Worksheet - Instructions)

11.  

12. Add Line 10 and Line 11

12.  

13. Adjusted net Connecticut minimum tax credit (See 2004 Tax Income Worksheet - Instructions)

13.  

14. Subtract Line 13 from Line 12. This is your projected Connecticut income tax liability for 2004.  Enter it here and on Line 1 of Worksheet 2.

14.

 
WORKSHEET 2
 

PROJECTED INCOME TAX WITHHOLDING AND ESTIMATED PAYMENTS FOR 2004
NOTE: 
Enter combined amounts if married filing joint return.

1. Enter your projected Connecticut income tax liability for 2004 from Line 14 of Worksheet 1.

1.  

2. Total Connecticut income tax withheld to date during 2004 from all of your jobs.  (You should be able to find your withholding to date on your last pay statement.)

2.  

3. Connecticut income tax withholding expected during the rest of 2004. For each job, multiply the amount of Connecticut income tax now being withheld each payday by the number of paydays remaining in 2004 and enter the combined amount for all jobs.
New Hires: Multiply the amount of Connecticut income tax to be withheld for each payday by the number of paydays remaining in 2004.

3.  

4. Total projected Connecticut income tax withholding for all paydays in 2004. (Add Line 2 and Line 3)

4.  

5. Enter estimated Connecticut income tax paid or expected to be paid for 2004 with Form CT-1040ES and any overpayment applied from your 2002 Connecticut income tax return.

5.  

6. Total Connecticut withholding and estimated payments. (Add Line 4 and Line 5)

6.  

7. Subtract Line 6 from Line 1

7.  

8. Divide the amount on Line 7 by the number of paydays remaining in 2004 and enter the result.  If the amount on Line 7 is a positive amount, you may be underwithheld.  See How Do I Increase My Withholding?   If the amount on Line 7 is a negative amount, you may be overwithheld.  See How Do I Decrease My Withholding?

8.  

EFFECT OF THIS DOCUMENT:  An Informational Publication is a document issued by the Department of Revenue Services (DRS) that addresses frequently-asked questions about a current position, policy, or practice, usually in a less technical question and answer format.


 
EFFECT ON OTHER DOCUMENTS:  Informational Publication 2003(19), Is My Connecticut Withholding Correct?, is modified and superseded.
 

RELATED FORMS AND PUBLICATIONS

Special Notice 2003(21), 2003 Legislation Affecting the Connecticut Income Tax.

Form CT-1040, Connecticut Resident Income Tax Return

Form CT-1040NR/PY, Connecticut Nonresident or Part-Year Resident Income Tax Return

Form CT-1040ES, 2004 Estimated Connecticut Income Tax Payment Coupon For Individuals
 

 
TABLE A - EXEMPTIONS

TABLE B - CONNECTICUT INCOME TAX

TABLE C - PERSONAL TAX CREDITS

 

 
Schedule 1, Modifications to Federal Adjusted Gross Income
(Form CT-1040 or Form CT-1040NR/PY)
 
Enter all amounts as positive numbers. For more complete information, see the instructions to Form CT-1040 or Form CT-1040NR/PY.

Interest on State and Local Government Obligations Other than Connecticut

Enter on Worksheet 1, Line 2 the total amount of interest income derived from state and municipal government obligations (other than obligations of the State of Connecticut or its municipalities) which is not taxed for federal income tax purposes. Do not enter interest income derived from government obligations of Puerto Rico, Guam, American Samoa, or U.S. Virgin Islands.

Exempt-Interest Dividends From a Mutual Fund Derived From State or Municipal Government Obligations Other than Connecticut

Enter on Worksheet 1, Line 2 the total amount of exempt-interest dividends received from a mutual fund that are derived from state and municipal government obligations, other than obligations of the State of Connecticut or its municipalities. If the exempt-interest dividends are derived from obligations of Connecticut and other states, enter only the percentage derived from non-Connecticut obligations. Do not enter exempt-interest dividends derived from government obligations of Puerto Rico, Guam, American Samoa, or U.S. Virgin Islands.

Special Depreciation Allowance for Qualified Property

If you filed federal Form 4562, Depreciation and Amortization (Including Information on Listed Property), and claimed a special depreciation allowance, see the instructions to Form CT-1040 or Form CT-1040NR/PY for guidance on calculating the amounts to enter on Worksheet 1, Line 2 and Line 4. Also, see Special Notice 2003(21), 2003 Legislation Affecting the Connecticut Income Tax.

Taxable Amount of Lump-Sum Distribution From Qualified Plans Not Included in Federal AGI

If you filed federal Form 4972, Tax On Lump-Sum Distributions, with your federal Form 1040 to compute the tax on any part of a distribution from a qualified plan, enter that part of the distribution on Worksheet 1, Line 2. Do not enter any part of the distribution reported on federal Form 1040, Line 16a; federal Form 1040A, Line 12a; or federal Form 1040, Schedule D.

Beneficiary’s Share of Connecticut Fiduciary Adjustment

If you have any income from an estate or trust, your share of any Connecticut modifications that apply to such income (that is, your share of the Connecticut fiduciary adjustment) will be shown on Form CT-1041, Connecticut Income Tax Return for Trusts and Estates, Schedule B, Part 1, Column 5. Your share of these modifications should be provided to you by the fiduciary. If your share of these modifications is greater than zero, enter the amount on Worksheet 1, Line 2. If your share of these modifications is less than zero, enter the amount on Worksheet 1, Line 4.

If you are a beneficiary of more than one trust or estate, enter the net amount of all such modifications, if greater than zero, on Worksheet 1, Line 2. If the net amount is less than zero, enter the amount on Worksheet 1, Line 4.

Loss on Sale of Connecticut State and Local Government Bonds

Enter on Worksheet 1, Line 2 the total losses from the sale or exchange of notes, bonds or other obligations of the State of Connecticut or its municipalities used in determining gain (loss) for federal income tax purposes, whether or not the entire loss is used in computing federal adjusted gross income.

Interest on United States Government Obligations

Enter on Worksheet 1, Line 4 the total amount of interest income (to the extent includible in federal adjusted gross income) derived from U.S. government obligations, which federal law prohibits states from taxing (for example, U.S. government bonds such as Saving Bonds Series EE and Series HH, U.S. Treasury bills and notes). 

For Series EE U.S. Savings Bonds, you may include only the amount of interest subject to federal income tax after exclusion of the amounts reported on federal Form 8815. In general, you will report the net taxable amount on federal Form 1040, Schedule B or federal Form 1040A, Schedule 1.

Do not enter the amount of interest income derived from Federal National Mortgage Association (Fannie Mae) bonds, Government National Mortgage Association (Ginnie Mae) bonds, and Federal Home Loan Mortgage Corporation (Freddie Mac) securities. Federal law does not prohibit states from taxing interest income derived from these obligations, and this interest income is taxable for Connecticut income tax purposes.

Do not enter the amount of interest paid on any federal income tax refund.

Exempt Dividends From Certain Qualifying Mutual Funds Derived From U.S. Government Obligations

Enter on Worksheet 1, Line 4 the total amount of exempt dividends received from a qualifying mutual fund that are derived from U.S. government obligations. A mutual fund is a qualifying fund if, at the close of each quarter of its taxable year, at least 50% of the value of its assets consists of U.S. government obligations. The percentage of dividends that are exempt dividends should be reported to you by the mutual fund.

Do not enter the amount of dividend income derived from Federal National Mortgage Association (Fannie Mae) bonds, Government National Mortgage Association (Ginnie Mae) bonds, and Federal Home Loan Mortgage Corporation (Freddie Mac) securities. Federal law does not prohibit states from taxing income derived from these obligations, and this income is taxable for Connecticut income tax purposes.

Social Security Benefit Adjustment

If you will file a federal income tax return as Single or Married Filing Separately and you expect your federal adjusted gross income will be less than $50,000, or Married Filing Jointly or Head of Household and you expect your federal adjusted gross income will be less than $60,000, enter on Worksheet 1, Line 4 the amount of federally taxable Social Security benefits reported on federal Form 1040, Line 20b or federal Form 1040A, Line 14b. If you expect your federal adjusted gross income will be above the threshold for your filing status, complete the Social Security Benefit Adjustment Worksheet included with Form CT-1040 or Form CT-1040NRPY and enter the result on Worksheet 1, Line 4.

Refunds of State and Local Income Taxes

Enter on Worksheet 1, Line 4 the amount of taxable refunds of state and local income taxes reported on federal Form 1040, Line 10. If federal Form 1040, Line 10 is blank, or if you filed federal Forms 1040A, 1040EZ, or telefiled your federal return, enter "0."

Tier 1 and Tier 2 Railroad Retirement Benefits and Supplemental Annuities

Enter on Worksheet 1, Line 4 the total amount of Tier 1 and Tier 2 railroad retirement benefits or supplemental annuities received during 2004 that will be included on federal Form 1040, Line 16b or Line 20b, or federal Form 1040A, Line 12b or Line 14b, and that were not already subtracted in arriving at your Social Security Benefit Adjustment. See Special Notice 2003(21), 2003 Legislation Affecting the Connecticut Income Tax. Likewise, enter the amount of railroad unemployment benefits including sickness benefits paid by the Railroad Retirement Board (RRB) in lieu of unemployment benefits, to the extent included in your federal adjusted gross income. However, do not enter sickness benefits paid by the RRB resulting from an on-the-job injury, because these benefits will not be included in your federal adjusted gross income.

Gain on Sale of Connecticut State and Local Government Bonds

Enter on Worksheet 1, Line 4 the total of all gains from the sale or exchange of notes, bonds or other obligations of the State of Connecticut or its municipalities used in determining gain (loss) for federal income tax purposes.


 
FOR TAX INFORMATION

TTY, TDD, and Text Telephone users only may transmit inquiries anytime by calling 860-297-4911.

Personal taxpayer assistance is available during business hours.

Write to:

Department of Revenue Services
Taxpayer Services Division
25 Sigourney Street
Hartford CT 06106-5032


WALK-IN OFFICES

For free assistance or forms, visit our offices from Monday through Friday, 8:00 a.m. to 4:30 p.m. For pre-recorded directions to DRS offices, call CONN-TAX and press 3. If you require special accommodations, please advise the DRS representative.

BRIDGEPORT
10 Middle Street
WATERBURY
55 West Main  Street, Suite 100
HARTFORD
25 Sigourney Street, Ste. 2 
NORWICH
401 West Thames Street, Building #700, Norwich, CT 06360
 

FORMS AND PUBLICATIONS

May be obtained anytime by using any of the following resources:


ELECTRONIC FILING OPTIONS

 
DEPARTMENT OF REVENUE SERVICES MISSION STATEMENT
 
The Mission of the Connecticut Department of Revenue Services is to administer the tax laws of the State of Connecticut and collect the tax revenues in the most cost effective manner; achieve the highest level of voluntary compliance through accurate, efficient, and courteous customer services; and perform in a manner which instills public confidence in the integrity, and fairness of the state's tax programs.