An employee had elected to reduce their CT State Tax withholding per pay period, however they did not have enough calculated state withholding based on their pay to reduce the elected amount.

They now have a negative State Tax withholding and are not sure how to list on their tax returns. What should they claim? The negative amount or zero?

  • What's on their paycheck? Did they actually get extra net pay from the employer? – void_ptr Apr 4 '19 at 15:48
  • The paycheck is calculating a net of the negative state withholding against the positive Federal taxes resulting in a reduced tax amount. The reduced total tax withholding is then applied against the employees pay. – Jen Apr 4 '19 at 16:22
  • 2
    This doesn't really make sense. Can you edit and describe exactly what happened? How did the employer withhold a negative amount of state income tax? Amount withheld for state income tax shouldn't really be related to the amount withheld for federal taxes. – user42405 Apr 4 '19 at 17:47
  • Is the total amount of state withholding on the W-2 a negative number? – Nosjack Apr 4 '19 at 18:50

The employee should correctly fill out form CT-1040 based on the amount they had withheld, whether negative or not. If for some reason they had a "negative" amount of state taxes withheld, that means that they might owe more tax for the year and should include the negative amount on the form.

The only time that you enter "0" when a number is actually not zero, is when the form explicitly states something along the lines of

If the amount is less than "0", then enter "0"

The form makes no such statement for the lines where you input your total withholding for the year. The employee should make sure that their W-2 shows the correct amount withheld, and use that number for the 1040 form.

For example, the employee has a total of -$300 "withheld" for 2018. They would simply put "-300" in column C of line 18a. Unless they made additional tax payments outside of withholding or have tax credits, the total tax owed will probably be greater than the amount withheld and lines 26-30 of the form will apply.

The format of the negative number should probably just use a dash "-". While the form does not specify for withholding numbers, it does say that for business losses a negative sign should be used (as opposed to parentheses or brackets).

Also, I would get with the organization/people that do your payroll, as a "negative" withholding amount should probably not be allowed.

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