This week’s question comes from Sean, a company president. Connecticut has passed an income tax increase retroactive to January 1, 2011. How does the Connecticut tax law change affect my withholding? Answer: The Connecticut Department of Revenue Services has issued new withholding tables that take the new tax changes into effect.

Number of Tax Brackets Increases from Three To Six

The number of tax brackets under the new law changed from three (3%, 5%, and 6.5%) to six (3%, 5%, 5.5%, 6%, 6.5% and 6.7%). In addition, the 3% rate is phased out for individuals with Connecticut adjusted gross income in excess of the following amounts:

• Single – $56,500
• Filing separately – $50,250
• Head of household – $78,500
• Filing jointly or qualifying widow or widower – $100,500

Revised Withholding Tables and Calculation Rules Took Effect August 1

The withholding tax tables (the withholding tables containing the pre-calculated total amount to withhold per pay period) have been revised to reflect the new rates, the 3% phase out provision, and a catch-up withholding amount. The revised withholding tables are effective August 1, 2011.

Additionally, the withholding calculation rules have been revised to reflect the new income tax rates, the 3% phase-out provision, the recapture tax calculation, and a catch-up withholding amount.

Revised Rules and Tables Include a Catch-Up Provision

The withholding calculation rules were revised to reflect the additional income tax rates, the 3% phase-out provision, the recapture tax provision under each withholding code, and the catch-up withholding amount. The withholding calculation rules instruct employers how to calculate the amount of tax that should be withheld for the remainder of the year from employees who are affected by these changes.

The 2011 withholding tables were revised to reflect the additional income tax rates and the 3% phase-out provision for the remainder of the year. They also include a catch-up amount to make up for the withholding tax for the first seven months of 2011 in which withholding tax was calculated at the rates in effect prior to the new legislation. The catch-up amount was spread out for the remainder of the year beginning on August 1, 2011.

Vision Payroll Is Using Revised Withholding Calculation Rules

Effective August 1, 2011, Vision Payroll is using the revised withholding calculation rules to calculate withholding for Connecticut employees.