Connecticut Payroll Tax: Employer Responsibilities

Employers in Connecticut have state-specific payroll tax obligations, which include contributions and withholdings managed on behalf of their employees. Fulfilling these responsibilities involves understanding which taxes apply, registering with state agencies, calculating the correct amounts, and filing returns and payments on time.

Identifying Connecticut Payroll Tax Obligations

Connecticut Income Tax Withholding

Employers in Connecticut must withhold state income tax from employee wages for both residents and nonresidents performing services in the state. The Connecticut Department of Revenue Services (DRS) oversees the collection and enforcement of this tax.

An individual is considered an employee if the business has the right to direct and control the work performed. The obligation to withhold exists regardless of where the company’s payroll department is physically located. For employees who live in Connecticut but work in another state, employers may have additional withholding responsibilities to cover the tax owed to Connecticut that exceeds the amount withheld for the work state.

State Unemployment Tax (SUTA)

Connecticut’s State Unemployment Tax Act (SUTA) requires employers to pay taxes that fund unemployment benefits for workers who have lost their jobs through no fault of their own. This is an employer-paid tax; it is not deducted from employee wages. The Connecticut Department of Labor (DOL) administers this program, collects the SUTA taxes, and determines the specific tax rate for each business annually.

Paid Family and Medical Leave (PFML)

The Connecticut Paid Family and Medical Leave (PFML) program provides employees with paid leave for qualifying family or health reasons. This program is funded entirely through employee contributions. Employers are responsible for withholding these contributions from employee wages and remitting them to the CT Paid Leave Authority.

Employers are also required to provide written notice to employees about the PFML program at the time of hire and annually thereafter.

Employer Registration and Employee Setup

Before processing payroll, businesses must register as employers with the appropriate state agencies. This involves separate registrations for income tax withholding and unemployment insurance to ensure the company can legally remit taxes.

Business Registration

Employers must register with the DRS to obtain a Connecticut Tax Registration Number for withholding income tax. This can be completed online through the myconneCT portal, and the process results in receiving the number within about 10 business days.

Separately, employers must register with the Connecticut Department of Labor (DOL) to establish an unemployment insurance (UI) tax account. This registration is required when a business pays $1,500 or more in wages in a calendar quarter or has at least one employee for any part of a day in 20 different weeks of a calendar year. This process cannot be completed before an employee’s start date, as the system does not accept future dates.

Employee Information Gathering

Accurate tax withholding depends on collecting the correct information from each employee. The primary document for this purpose is Form CT-W4, Employee’s Withholding Certificate. This form provides the employer with the employee’s filing status and any adjustments, which together determine their specific withholding code.

Employers must have a completed and signed Form CT-W4 on file for every individual on their payroll. This form is the basis for calculating the correct amount of state income tax to withhold from each paycheck.

Calculating and Withholding Taxes

Once registered and with employee documentation collected, employers calculate tax amounts each pay period. This involves using state-provided tables and rates for income tax, unemployment insurance, and paid leave.

Income Tax Withholding Calculation

The calculation of state income tax to be withheld from an employee’s pay is based on two key pieces of information: the employee’s wage amount for the pay period and their withholding code from Form CT-W4. The Connecticut Department of Revenue Services (DRS) provides official income tax withholding tables and calculation methods to perform this computation. These resources are structured based on payroll frequency and the employee’s filing status.

The state’s income tax is progressive, with rates ranging from 2% to 6.99%, depending on the employee’s income level. Employers must use the DRS resources to find the correct tax amount corresponding to the employee’s earnings and withholding code.

SUTA Tax Calculation

SUTA is an employer-paid tax calculated each pay period by multiplying an employee’s gross wages by the employer’s assigned SUTA tax rate. This calculation only applies until an employee’s wages reach the annual taxable wage base of $26,100 for 2025. No further SUTA tax is owed for that employee once their earnings exceed this threshold for the year.

The DOL assigns the tax rate annually. New employers start with a rate of 2.2% for 2025. After about three years, the DOL assigns an experience rate based on the company’s history of unemployment claims, which can range from 1.1% to 8.9%.

PFML Contribution Calculation

The Paid Family and Medical Leave (PFML) contribution is a flat 0.5% of an employee’s gross wages. This amount is withheld from the employee’s paycheck each pay period.

This withholding applies to an employee’s wages up to the annual limit set by the Social Security Administration, which is $176,100 for 2025. Deductions cease once the employee’s annual earnings surpass this wage base.

Filing and Remitting Tax Payments

After calculating tax amounts, employers file tax returns and remit the collected funds to the state agencies. This process is governed by specific forms and deadlines.

Tax Filing Forms and Deadlines

Employers report income tax withholding using Form CT-941, Connecticut Quarterly Reconciliation of Withholding. This form summarizes the total wages paid and the state income tax withheld during a calendar quarter. The deadlines for filing Form CT-941 and paying the withheld tax are April 30, July 31, October 31, and January 31 for the preceding quarter. The frequency of payment—weekly, monthly, or quarterly—is determined by the employer’s remitter status, which is assigned by the DRS based on the amount of tax withheld.

For unemployment insurance, employers file Form UC-2/UC-5A, Employer Contribution Return, with the Department of Labor. This quarterly report details wages paid and is used to calculate the SUTA tax owed. The deadlines for these filings coincide with the income tax withholding deadlines, as do the quarterly PFML contribution remittances.

Submission Process

Connecticut requires employers to file returns and make payments electronically through its online portal, myconneCT. To submit a return, an employer logs into their account, navigates to the appropriate form, and enters the pre-calculated totals for wages and taxes.

The portal guides the user through completing the return and initiating an electronic payment from a business bank account. This electronic process applies to both the DRS for income tax and the DOL for unemployment insurance, providing a centralized management method.