Governor Rell: State Checking Reports of

Larger-Than-Normal Payroll Deductions

            Governor M. Jodi Rell today announced that she has directed the state Department of Revenue Services to look into reports that some workers may be taking home smaller-than-normal paychecks because of over-withholding by payroll companies using inappropriate income limits to make deductions.

            “This is absolutely unacceptable,” Governor Rell said. “People in Connecticut work much too hard and much too long to be shortchanged. That money belongs in the wage-earner’s wallet, especially at a time when the economy remains volatile and some families may, in fact, be ‘down’ a paycheck due to a job loss or reduced hours. The Department of Revenue Services is moving swiftly to determine the scope of the problem and will work with companies to rectify it.”

            State labor officials estimate that more than 40 percent of employers in Connecticut use payroll companies to administer paychecks. Governor Rell said state officials began receiving reports of over-withholding in the wake of new payroll tax deduction thresholds. The state budget adopted by the Legislature raised the income tax for some filers, but the highest rate of 6.5 percent applies only to individuals earning more than $500,000 and joint filers earning more than $1 million.

            “To ensure fairness and make certain that all Connecticut taxpayers are properly assessed, the state is reaching out to the dozens of companies – large and small – that handle payroll accounts for Connecticut-based businesses,” Governor Rell said.

            The Governor said she has asked DRS Commissioner Richard D. Nicholson to contact the payroll companies to ensure that they fully understand the new withholding levels. She is also directing DRS to work with the companies to make the necessary adjustments so that withholding for employees is not excessive during the remainder of the year.

            For taxable years beginning on or after January 1, 2009, the new 6.5 percent income tax rate only applies to:

·        Individuals filing “single” or “separately” and whose Connecticut taxable income is more than $500,000;

·        Individuals filing as “head of the household” and whose Connecticut taxable income is more than $800,000; and

·        Individuals filing “jointly” or as “qualifying widow(er)” and whose Connecticut taxable income is more than $1 million.

            For more information, see the DRS Web site at www.ct.gov/drs.