In the past withholding on pension and annuity payments to Connecticut residents was optional. I always elected no withholding. If I owed any tax, and I haven't for several years, I made estimated payments.
Now, for 2018 the state has made withholding mandatory. In the absence of a completed W4-P form the payer is mandated to withhold 6.99%.
I have an inherited annuity with Vanguard in which I selected the "stretch" distribution option with quarterly payments. I dutifully completed a W4-P form and submitted it to Vanguard well in advance of the first distribution under the new rules. Per my research based on the withholding status I selected and the amount of the payment my withholding would be $0.00. Along comes the first distribution minus 6.99% withholding.
So I call Vanguard. Maybe the form never got to the right dept. She looks it up and yes they got the form. Tells me withholding is mandatory at 6.99% unless you select status "E", income under $24,000, which is the exemption amount. I politely told her no, you look in the tables under the status I selected for the payment amount and see that the amount to withhold is $0.00. Well she'll sent it to the compliance dept. that handles these things for review and they'll respond in 3 or 4 days.
I'm somewhat sympathetic toward Vanguard dealing with all these state specific rules but this is a pain in the a** to me. It's not the amount of money, I'll get it back in a year, it's the whole process.
I mostly blame our poorly run state, deeply in debt, looking for anyway to bring in cash sooner rather than later. We are the land of lotteries, casinos, soon to be sports betting and probably recreational marijuana. A few years ago they changed the law to allow liquor stores to be open on Sundays. The store owners hate it. Why was it done? Because they don't want to lose tax revenue to people on the Massachusetts border who could cross the line on Sunday to get their liquor.
Now, for 2018 the state has made withholding mandatory. In the absence of a completed W4-P form the payer is mandated to withhold 6.99%.
I have an inherited annuity with Vanguard in which I selected the "stretch" distribution option with quarterly payments. I dutifully completed a W4-P form and submitted it to Vanguard well in advance of the first distribution under the new rules. Per my research based on the withholding status I selected and the amount of the payment my withholding would be $0.00. Along comes the first distribution minus 6.99% withholding.
So I call Vanguard. Maybe the form never got to the right dept. She looks it up and yes they got the form. Tells me withholding is mandatory at 6.99% unless you select status "E", income under $24,000, which is the exemption amount. I politely told her no, you look in the tables under the status I selected for the payment amount and see that the amount to withhold is $0.00. Well she'll sent it to the compliance dept. that handles these things for review and they'll respond in 3 or 4 days.
I'm somewhat sympathetic toward Vanguard dealing with all these state specific rules but this is a pain in the a** to me. It's not the amount of money, I'll get it back in a year, it's the whole process.
I mostly blame our poorly run state, deeply in debt, looking for anyway to bring in cash sooner rather than later. We are the land of lotteries, casinos, soon to be sports betting and probably recreational marijuana. A few years ago they changed the law to allow liquor stores to be open on Sundays. The store owners hate it. Why was it done? Because they don't want to lose tax revenue to people on the Massachusetts border who could cross the line on Sunday to get their liquor.
