Understanding Payroll Taxes in Connecticut: A Complete Guide

Navigating payroll taxes in Connecticut involves understanding a complex system of federal and state obligations. This guide provides employers with a detailed overview of Connecticut's payroll tax requirements and regulations to ensure compliant payroll withholding, including unemployment insurance, personal income tax, and workers’ compensation. 

The Department of Revenue Services (DRS), the Connecticut Department of Labor (CTDOL) and the CT Paid Leave Authority administer payroll taxes at a state level. Connecticut does not permit municipalities to collect local taxes. Business owners in Connecticut are responsible for managing US FICA taxes and state taxes. The state has a progressive tax system, meaning that as employees' tax contributions rise as their earnings increase.

Connecticut's payroll taxes include Unemployment Insurance (UI), Paid Family and Medical Leave Tax (PFMLA), and Connecticut Income Tax:

Paying unemployment insurance (UI)

Unemployment insurance (UI), also referred to as State Unemployment Insurance (SUI), provides temporary financial relief for eligible employees who become unemployed due to circumstances beyond their control. Employers are responsible for funding this national program which is administered by the US Department of Labor.

UI rates and requirements vary between states. In Connecticut, new employers pay a rate of 2.5% for about three years, after which rates range from 1.1% to 7.8% based on experience. Quarterly UI payments to CTDOL are due on April 30, July 31, October 31, and January 31.

Connecticut offers an online portal for employers to manage unemployment insurance contributions efficiently. By accessing the online portal, you can process your UI payments seamlessly.

In Connecticut, most nonprofits are responsible for all payroll taxes. Section 501(c)(3) nonprofits have the option to pay UI taxes as businesses or reimburse CT Department of Labor for UI benefits paid.

For further guidance and resources on paying unemployment insurance in Connecticut, refer to the Connecticut Department of Labor.

Paid Family and Medical Leave Tax (PFMLA)

Paid Family and Medical Leave Tax (PFMLA) provides temporary financial relief for employees taking leave for family or health reasons. FMLA is funded by employee wage deductions, ranging from 0.5% up to the Social Security contribution base.

Employers are responsible for withholding and remitting the deductions through quarterly payments to the CT Paid Leave Authority. The CT Paid Leave Authority's online portal makes remitting deductions seamless. You must make the quarterly payments by the due dates: April 30, July 31, October 31, and January 31.

Withholding personal income tax (PIT) from your Connecticut employees

Personal income tax (PIT) is also known as individual income tax or state income tax. PIT is levied on the income of Connecticut residents and is deducted directly from the employee’s wages by the employer.

As the employer, you are responsible for withholding and remitting the correct amount to the state. The DRS can audit state tax returns to ensure correct tax payments. Connecticut’s Department of Revenue Services' online portal facilitates the smooth and compliant payment of withheld personal income tax.

For more detailed information on managing withholding tax in Connecticut, refer to the Connecticut Department of Revenue Services resources.

Paying workers’ compensation (WC) in Connecticut

Workers' compensation is an essential insurance coverage for employees, providing protection in case of work-related injuries or illnesses. As a business owner in Connecticut, you are required to provide this insurance to your employees, even if you have just one worker.

To ensure you have the appropriate workers’ compensation coverage, employers should obtain insurance from a qualified commercial carrier within the state. The Connecticut Workers’ Compensation Commission offers valuable information on finding a qualified commercial carrier that meets the state’s worker’s compensation insurance regulations.

Additional Information

Audit Possibility: The DRS can audit state tax returns to ensure correct tax payments. Nonprofit Organizations: Most nonprofits are responsible for all payroll taxes. Section 501(c)(3) nonprofits have the option to pay UI taxes like businesses or reimburse CTDOL for UI benefits paid.

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Connecticut payroll taxes, payroll compliance and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.