Connecticut businesses are reminded that effective with payments made on or after January 1, 2018, Connecticut state income tax withholding is required from pension and annuity distributions and other deferred compensation paid to Connecticut residents. The withholding requirement applies to businesses that maintain an office or transact business in Connecticut. Form CT-W4P, Withholding Certificate for Pension and Annuity Payments is revised effective January 1, 2018, to reflect this new requirement. (AN 2017(11).)

Prior to January 1, 2018, Connecticut income tax withholding was required only when requested by the payee.

Taxable distributions subject to the new Connecticut income tax withholding requirement include:

— an employer pension
— an annuity
— a profit sharing plan
— a stock bonus
— a deferred compensation plan
— an individual retirement arrangement
— an endowment
— a life insurance contract

Revised 2018 Form CT-W4P required of all resident payees

The 2018 Form CT-W4P was revised to include withholding codes, similar to Form CT-W4.

Employee's Withholding Certificate, used by employers to compute income tax withholding on regular wages. Accordingly, payees are now required to choose a withholding code on the 2018 Form CT-W4P based on their anticipated filing status and estimated annual gross income. Versions of Form CT-W4P issued prior to the 2018 version are now obsolete.

If the 2018 Form CT-W4P is not submitted by a Connecticut resident to the payer as required, the payer is instructed to withhold Connecticut state income tax at the rate of 6.99%.

For more information on the 2018 Form CT-W4P and the new income tax withholding requirements, see the Department's guidance.

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