Connecticut Residents and IRA Distributions
  • Insights

  • Connecticut Residents and IRA Distributions

    Mark Campbell Insights

    Mark Campbell, Sr. Manager, Tax Advantaged Accounts, Wolters Kluwer

    Published December 21, 2017

    State Income Tax Withholding Rules Change January 1, 2018

    Beginning on January 1, 2018, financial organizations that maintain an office or transact business in the state of Connecticut and make taxable payments to residents of Connecticut, are required to withhold state income tax from individual retirement account (IRA) distributions. Wolters Kluwer’s interpretation of the new rules is that mandatory withholding applies to traditional [including simplified employee pension (SEP)] and Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs, but not to Roth IRAs. This has been confirmed verbally by a representative of the Connecticut Department of Revenue.

    With respect to state withholding on IRA distributions paid to Connecticut residents at this time, Wolters Kluwer knows the following:

    • Beginning in 2018, residents will not have the ability to waive state income tax withholding
    • The rate of withholding will be based on an individual’s completion of Form CT-W4P, Withholding Certificate for Pension or Annuity Payments
    • The withholding default rate will be 6.99%

    Informational resources provided by the state of Connecticut relating to state income tax withholding include:

    In addition to the resources listed above, a representative from the state of Connecticut has indicated Informational Publication 2017(8), Connecticut Tax Guide for Payers of Nonpayroll Amounts, will be released. We have been told the goal is to make this resource available by the end of 2017, but it might not be approved for release until 2018.

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