Payroll tax in Connecticut: What employers need to know [2023]

Running a business in Connecticut? As an employer, you have a great many responsibilities, not least of which is taxes. Dealing with this obligation can be daunting: In addition to federal income tax and the FICA taxes levied by the IRS, which include Medicare and Social Security contributions, business owners are also responsible for state payroll taxes. To make matters more complicated, regulations vary across states in the US. It’s crucial to understand the tax laws in the states where your employees live so you can avoid penalties.

In the 1990s, the state of Connecticut switched from a flat-rate tax system to a progressive one, which has added complexity for employers. With a progressive—or graduated—tax system, the more your employees earn, the higher their taxes. Similarly, if your company is growing and you’re adding new hires, your employer tax contributions will increase, as will the amount you withhold from each employee’s paycheck.

Whether you’re running a small business or a global company, if you have employees in the state of Connecticut, you need a keen understanding of Connecticut payroll taxes, their rates, and who owes what, as well as the deadlines. In this helpful guide, we’ll review all of that and more.

The 3 Connecticut payroll taxes

The Connecticut Department of Revenue Services (DRS), the Connecticut Department of Labor (CTDOL), and the CT Paid Leave Authority are all responsible for administering payroll taxes at the state level. Under the state’s new hire reporting requirements, all employers must report new hires within 20 days of that worker’s start date, and they must fill out and send a CT-W4 form for each employee to the DRS.

There are three Connecticut payroll taxes. We’ll go over each one in more detail here.

State unemployment insurance tax

Connecticut’s state unemployment insurance (SUI) tax is collected to fund unemployment benefits for employees who have lost their jobs due to circumstances beyond their control, such as layoffs. The Connecticut Department of Labor both collects SUI tax and determines the tax rates annually. New employers pay 2.5%—the tax rate for 2024—for about three years, after which the CTDOL assigns them an experience rate and a new tax rate, which will range from 1.1% to 7.8% this year.

Under the Federal Unemployment Tax Act (FUTA), Connecticut employers typically must also contribute to federal unemployment taxes as well as state ones.

Paid Family and Medical Leave Tax

The state Paid Family and Medical Leave Act (PFMLA) provides temporary financial relief to eligible employees who need to take time off from work to care for a sick or injured family member or to attend to their own health. This tax program is administered by the CT Paid Leave Authority. As of January 1, 2021, the state decided to fund this entirely by deductions from taxable wages. Employers must withhold 0.5% up to the Social Security contribution base, which is $160,200 in 2023.

Connecticut income tax

In addition to federal income tax, Connecticut residents are on the hook for state income tax. And unfortunately, this New England state is known for being on the high end in terms of tax rates. Employers are required to withhold the correct amount from each employee’s paycheck. The DRS manages the reporting, collection, and enforcement of state income tax, and the tax rates are based on employees’ CT-W4 forms.

In 2024, the progressive income tax rates range from 2% to 6.99% of an employee’s wages. How much each person pays is based on the amount they make and their filing status.

Navigating payroll tax laws can be challenging. This is especially true in Connecticut, with its complex progressive state income tax system and three types of payroll taxes. Rippling’s payroll compliance software makes it easy. Rippling automatically calculates your taxes and submits your tax forms and payments on your behalf—monitoring tax laws at the federal and Connecticut state levels to ensure total compliance. Rippling’s PEO takes it a step further: It can register and maintain your state tax accounts for you, automating even more of the payroll tax process.

Payroll tax due dates in Connecticut

Connecticut employers must pay SUI taxes to the Connecticut Department of Labor—not the DRS—each quarter. The deadlines are as follows:

• First quarter (January-March): Due April 30
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

If one of these dates falls on a weekend or a legally recognized holiday, you must complete your tax filing responsibilities by the following business day. 

PFMLA tax withholdings must be remitted to the CT Paid Leave Authority quarterly as well. The deadlines are the same as those for SUI taxes.

How to submit payroll taxes in Connecticut

We’ve covered the types of payroll taxes you’re responsible for and the due dates. You’re likely wondering how you can complete your tax filing responsibilities. Well, in the state of Connecticut, as in many other states, tax filing is mostly done online. Let’s go over how to submit your taxes.

Enroll in e-Services 

For employers who are looking for a quick, simple, and secure way to manage payroll taxes, their best bet is to visit the website of the agency that collects those taxes. The CT Paid Leave Authority has an online portal to remit contributions, as does the CTDOL. For all other taxes that are paid to the DRS, visit portal.ct.gov. Each site has instructions about how to set up an account and make your payments, as well as answers to FAQs.

Rippling’s full-service payroll software

Looking for an even easier payment option? Rippling’s payroll software is so powerful it practically runs itself. Rippling automates all your compliance work and files your federal and Connecticut state and payroll taxes at the right time with the IRS and the Connecticut Department of Revenue Services.

FAQs about Connecticut payroll taxes

Are there local tax laws in Connecticut?

No, the state of Connecticut doesn’t permit municipalities to collect local taxes.

Can your tax returns be audited in Connecticut?

Yes, the Connecticut Department of Revenue Services reserves the right to audit the state tax returns residents file to ensure they’re paying the correct amount of taxes.

Are nonprofit organizations subject to payroll taxes in Connecticut?

Yes, most nonprofits are responsible for remitting payroll taxes in the state of Connecticut. However, nonprofits that qualify for an exemption under Section 501(c)(3) of the Internal Revenue Code (IRC) can decide how they want to pay for their UI costs. They have two options: Pay the same UI taxes as commercial businesses or reimburse the Connecticut Department of Labor for the full cost of the UI benefits paid to their former workers.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.