Changes to Income Tax Withholding on Pensions
Beginning this year, Connecticut is requiring state income tax withholding on pensions, annuities, and other deferred compensation. This change is not a tax increase and is intended to reduce costs by streamlining the tax collection process.
Residents receiving taxable pension, annuity or other deferred distributions should be contacted by their plan administrator and provided with instructions as well as the newly designed Form CT-W4P to fill out and return to the plan administrator. If the form is not submitted, taxes will automatically be withheld at the highest rate of 6.99%.
The form and accompanying instructions are also available on the Connecticut Department of Revenue Services website.The form can then be submitted to the payer directly.
According to DRS, many taxpayers already have withholding on retirement income. This change will help prevent situations where people are surprised to receive a large tax bill that they have not budgeted for. If you have questions about this change, please don't hesitate to contact my office at (860) 240-1378.