New Income Tax Procedures
| Pages | 366 |
| Publication year | 2021 |
65 CBJ 366. NEW INCOME TAX PROCEDURES
A. Individuals
The New Connecticut income tax does not contain an express requirement that individuals make or file Connecticut returns. However, this is implied in the portion of the statute which makes the income tax return required under the Act due by the 15th day of the fourth month following the close of a taxpayer's taxable year.(fn1)
The tax due with the return must be paid by its due date, without regard to extensions of the filing date, which may be given for reasonable cause(fn2) The return will be a Form CT- 1040.
Nonresident partners receiving Connecticut source partnership income may, instead of filing their own individual Connecticut returns, elect to have the partnership file a group return on their behalf.(fn3) In that case, the partnership acts as the nonresident partners' agent and pays their Connecticut tax for them.(fn4) It is not clear whether this includes making estimated tax payments, but there is no reason why it would not. This group return option is also available to S-Corporation shareholders, and to the beneficiaries of trusts and estates.(fn5)
B. Partnerships, S-Corporations, Trusts and Estates
Partnerships with either resident partners or Connecticut source income must file annual information returns by the 15th day of the fourth month following the close of their taxable years.(fn6) The return must show all partnership income and deductions and the name, address and federal taxpayer identification number of each partner entitled to share in partnership income, as well as the amount of each partner's distributive share of both Connecticut source and other income.(fn7) These requirements also apply to SCorporations, trusts and estates.(fn8)
In addition, partnerships doing business in Connecticut or having Connecticut source income must annually file an agreement by their nonresident partners to file Connecticut returns and timely pay their Connecticut tax on partnership income, and to be subject to personal jurisdiction in Connecticut for collection purposes.(fn9) If no agreement is filed, these partnerships must pay Connecticut tax on their nonresident partner's pro-rata shares of Connecticut source partnership income, at the "highest marginal tax rate".(fn10) The statute does not specify whether each nonresident partner must sign the agreement (presumably they would) or whether the "highest marginal rate" includes credits and exemptions (presumably it does not). S-Corporations, trusts and estates are also subject to this requirement.(fn11)
All employers who maintain offices or transact business in Connecticut must withhold an amount "substantially equivalent to the tax reasonably estimated to be due" from both their resident and nonresident employees' wages.(fn12) A nonresident employee's wages are therefore subject to withholding if they are attributable to a business, trade, profession or occupation carried on in Connecticut.(fn13) Presumably, this will be interpreted to mean wages attributable to services rendered by the employee in Connecticut.(fn14)
Connecticut residents working in other states are to have Connecticut income tax withheld only to the extent it exceeds the amount required to be withheld by the other state for services performed there. Thus, the tax of the state the employee works in is primary, and that of the employee's state of residence (Connecticut) is secondary.(fn15)
Both the statute and Connecticut's W-4 instructions are silent as to the priority of withholding from a nonresident's Connecticut wages. Applying the converse rule to that just stated, the Connecticut tax should be withheld first, with the employer withholding the other state's tax only to the extent it exceeds the Connecticut tax being withheld. If the employer will only withhold one state's tax, estimated payments will have to be made to the state of residence.
Although the Act says that the method of determining the amount to be withheld is to be prescribed by regulations, none have yet been adopted. The Act also provides for regulations to require that persons other than employers deduct and withhold taxes from payments made to residents, nonresidents and part-year residents.(fn16) Further, the Commissioner is empowered to enter into agreements with tax officers of other states which would govern the amounts to be withheld from nonresidents' Connecticut wages.(fn17)
Every Connecticut employer required to withhold Connecticut income tax from wages must give each of its employees an annual statement showing the amount of taxes deducted and withheld, before February 1 of the next succeeding year.(fn18) An employer willfully failing to do this on time can be penalized $5 for each statement not filed, up to $2,000 in any calendar year.(fn19) An employer who willfully fails to collect, account for and pay over any tax withheld must pay a penalty equal to the total amount required to be collected, accounted for and paid over.(fn20)
Employers are to use Form CT-WH, Connecticut Withholding Tax Payment, to send Connecticut income tax withholding payments to the D.R.S.(fn21) Connecticut payments are due on the same dates as federal income tax withholding payments.(fn22) A quarterly reconciliation form (Form CT-941) is due at the same time as the employer's quarterly federal tax return, even if no Connecticut tax is due.(fn23) An annual reconciliation form (Form CT24 W3) is also due on the last day of February.(fn24)
The D.R.S. mailed its withholding package to all employers who had federal identification numbers, regardless of whether they were required to withhold federal tax from their employees' income. Although there is no written guidance on this point, apparently there will not be Connecticut...
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