The Connecticut Department of Revenue Services collects income tax revenue for the state of Connecticut under the authority of chapters 224 and 229 of the General Statutes of Connecticut. Connecticut income tax law requires most individuals to file a return in the state unless such individuals earn less than gross income thresholds set by law.
Filing
According to the Yale Office of International Students and Scholars at Yale University, all residents and part-time residents who had Connecticut income tax withheld from their paychecks or made estimated tax payments to the Connecticut Department of Revenue Services must file a return. In addition, those who must file a tax return include single persons who exceed $13,000 in gross income annually, married couples or civil partners who earned more than $24,000, heads of households with earnings in excess of $19,000 and married individuals filing separately with more than $12,000 in annual income.
Rates
Per Section 12-700 of Connecticut income tax code, taxpayers in the state fall into either a 3 percent, 5 percent or 6.5 percent income tax bracket as of February 2011. Persons who earn $10,000 or less annually after deductions and credits pay 3 percent income tax. Residents who make between $10,000 and $500,000 a year pay $300 plus 5 percent tax on amounts earned over $10,000. High-income earners pay a 6.5 percent tax rate on all income earned over $500,000 annually.
Investments
According to Section 224-12-506 GSC, Connecticut does not tax dividends, capital gains and interest income if the taxpayer earned less than $54,000 from such investments for the 2010 tax year. The state taxes investment earnings in excess $54,000 at a progressive rate of between 0.75 percent and 9.75 percent. Taxpayers fall into the highest 9.75 tax bracket on annual capital earnings of $100,000 or more.
Penalties
Per Section 229-12-735 of the General Statutes, persons who do not turn in a return to the Department of Revenue Services within 3 months of the due date will face a penalty of the greater of $50 or 10 percent of owed tax. In addition, the late payer will pay an interest penalty of 1 percent per month on all outstanding tax balances. The commissioner of the Department of Revenue Services may choose to waive these penalties if taxpayer failed to pay because of reasonable cause.
Fraud
If a Connecticut taxpayer attempts to defraud the Department of Revenue Services by understating taxes or blocking the department from collecting tax, the department can assess a penalty equal to the amount of tax evaded per Section 229-12-735 of the statutes. A person who refuses to keep tax records and pay taxes with malicious intent shall be charged with criminal fraud according to Section 229-12-737 with a fine of up to $5,000 or imprisonment between one and five years.
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