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PAYROLL PROCESSING SOFTWARE LIMITATIONS MAY IMPACT INCOME TAX WITHHOLDING DRS
August 11, 2011
PAYROLL PROCESSING SOFTWARE LIMITATIONS MAY IMPACT INCOME TAX WITHHOLDING DRS Commissioner Outlets Options for Affected Taxpayers Hartford- The Connecticut Department of Revenue Services ( DRS) today (8/11/11) announced that it recently became aware of limitations in software used for payroll processing that may impact tax withholding from certain taxpayers. According to Commissioner Kevin B. Sullivan, the problem affected taxpayers who have requested on Form CT W4 that additional income tax be withheld from their paychecks. Said Commissioner Sullivan, "We began hearing late last week about problems for employers relying on automated payroll processing software, including the State of Connecticut. It appears that these systems are unable to distinguish additional voluntary withholding amounts from regular withholding when calculating catch - up withholding for the current tax year in accordance with recent legislative changes in the state personal income tax. Consequently, these taxpayers and their employers may be at risk of withholding". Commissioner Sullivan said, "The income tax changes became effective in early May and the Department promptly provided necessary withholding instructions before the end of the month. This problem only came to our attention after the withholding went into effect this month. We do not want this to affect taxpayers and employers who are making good faith effort to comply". Despite the payroll processing problem, Commissioner Sullivan advised affected tax payers that they can protect themselves from risk of underpayments in order to assure that enough tax is paid to meet the "safe harbor" of paying in at least as much as the amount of their last annual Connecticut income tax due. In order to assist taxpayers who may be dealing with or concerned about this problem, DRS is taking the extraordinary step of making available now the 2011 Estimated Income Tax Worksheet and the updated 2011 Income Tax Calculation Schedule. Taxpayers may use this information to estimate their 2011 income tax and take steps to assure that sufficient tax is withheld or otherwise paid. This information and more will be available online at www.ct.gov/drs. Said Commissioner Sullivan, "Taxpayers will rightfully ask whether they may be subjected to interest and penalty because of under withholding due to this problem. I want to assure taxpayers who find themselves in this situation that they will no be subjected to interest or penalty on such underpaid amounts. Similarly, employers who in good faith and solely due to this problem do not correctly withhold and pay in the taxes due for their employees will not be penalized in the event of an audit."
Member News is provided as a service of the Midstate Chamber of Commerce and is also featured in the monthly "Chamber News" newsletter mailed to members.
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