In early June, the state legislature passed a bill which became Public Act 17-147. Under the new law, pension plan administrators or payers of pensions or annuities are now required to withhold income taxes from disbursements. Prior law allowed taxpayers to instruct their plan administrators to withhold the appropriate amount of tax but did not require they do so. Taxpayers could choose to pay the full liability at the time they filed state income taxes.
While the new law does not affect the amount of tax owed, some pension recipients may depend on a certain amount per month for living expenses, and an automatic 6.99% deduction from the proceeds – if the proper form is not filed – may become a hardship. This is one of the reasons I did not support this bill.
Connecticut residents collecting pensions or annuities must file form CT-W4P indicating their pension and annuity withholding choices with their plan administrator otherwise the top level of 6.99% will be withheld. Differences between the amount of tax withheld and the amount actually due when filing state taxes will be assessed or returned to the taxpayer. Information about filing CT-W4P can be found at the Department of Revenue Service website. The form must be filed with your plan administrator, and not with the State of Connecticut.
It is recommended that those who receive pension or annuity payments contact their plan administrator as soon as possible – preferably before January 1 – to make certain they’re not subject to an improper amount of withholding. Additionally, the Department of Revenue Services has updated their online taxpayer assistance information at www.ct.gov/DRS and will be available to answer questions by calling 1-860-297-5962.