After the Connecticut General Assembly hiked taxes on high-income earners this month, employers must apply “catch up” withholding taxes on those individuals to 6.5 percent of their eligible earnings for the 2009 tax year.
The previous rate was 5 percent.
For individuals required to pay quarterly individual taxes, such as self-employed contractors, estimated taxes due January 15 must also take into account the new 6.5 percent rate.
The new withholding and estimated payment rates apply to individuals earning at least $500,000 annually; heads of households making at least $800,000; or couples who file jointly and have at least $1 million in annual income.
The Connecticut Department of Revenue Services (DRS) has offered to wipe out penalties for 75,000 taxpayers who are overdue on payments as part of the same initiative and to cut their outstanding interest by half.
The top 100 delinquent corporate tax payers in Connecticut owe nearly $26 million combined in taxes overdue at least 90 days, while the top 100 individual delinquents are in arrears nearly $13 million.
In the first quarter of the 2010 fiscal year ending next June, Connecticut tax collections were $216 million below their levels of a year ago, off 12 percent.
Taxpayers must remit the full taxes due by December to obtain the settlement terms, which applies to all taxes levied by DRS except the motor carrier tax and international fuel tax agreement taxes. Taxpayers that participate waive any rights of appeal to dispute the tax bill in question.
The offer is valid through December 15.
Taxpayers who do not receive a settlement offer letter, but believe they may qualify for the program, can call (860) 541-4274 weekdays for more information.
The DRS web site is www.ct.gov/drs. There is information there on how to pay estimated taxes under the new rate and how to determine the catch-up withholding for employees that are subject to the new rate.
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The DRS made headlines in 2007 over a missing computer. State auditors eventually faulted DRS for failing to safeguard taxpayer information when an agency laptop was stolen with confidential information on more than 106,000 taxpayers.
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DRS failed to properly secure electronic files, including encrypting laptops; lacked procedures for responding to data breaches; and allowed employees to access taxpayer data with few restrictions, according to Robert Jaekle and Kevin Johnston, Connecticut”™s auditors of public accounts.
Attorney General Richard Blumenthal said DRS has spent more than $1 million addressing the breach, and that no taxpayers have reported being the victims of identity theft or other crimes as a result of the incident.
DRS subsequently:
- moved confidential information to secure drives, while limiting who has access to it and the type of access employees have;
- is training employees regarding the security of taxpayer information, including for employees using laptops;
- removed the ability to store confidential data on laptop or desktop computers, and is monitoring the flow of confidential information between DRS systems and any electronic devices;
- increased the use of encryption technologies for data transfers between the agency and its vendors, and for emails to taxpayers; and
- is redacting confidential data when auditors are required to use paper documents for field work;
- is requiring identification passes for employees authorized to remove equipment necessary to perform their job duties (including laptops) from the building; and
- is implementing devices that require both a fingerprint identification and a password to access information stored on “thumb” drives for use in field audits.
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