Glum workers find too much tax being withheld
Published 4:40 pm, Wednesday, December 28, 2011
While shoppers a few weeks ago spent Black Friday hunting down holiday bargains, Bob Liu, of Ridgefield, sat in his car pleading with his employer's out-of-state payroll company to refund $1,200 in overwithheld taxes from his paycheck.
"I was on the phone with my payroll department in Illinois on Black Friday, sitting in a Sports Authority parking lot, practically in tears," said Liu, a Web developer.
He got the money refunded via Fed Ex.
"They were understanding," Liu said.
But other workers across the state who have experienced similar unexpected cuts in income have been told they must wait for next year's tax refund to be made whole.
"I didn't take the money. The state took the money," Roberta Miller, of McMellon Brothers aerospace parts in Stratford, said of the 30 staffers who had taxes overwithheld. She feels badly but said, "I can't give the money back to them."
The paycheck problems are the unintended consequences of the General Assembly's decision, sought by Democratic Gov. Dannel P. Malloy, to pass a retroactive income tax. The increases, implemented in August and retroactive until Jan. 1, were targeted at single filers earning at least $50,000 and joint household incomes of $100,000 or more.
But the changes have played havoc with payroll systems, and more and more victims are speaking out, confused and angered to lose cash during the holidays.
"I've been getting hammered since October," said Tony Scinto, a phone company technician and Republican Trumbull town councilman. "The company blames Connecticut and Connecticut blames the company."
The state Department of Revenue Services has spent months trying to clean up the paycheck mess, but to no avail.
A union official at Groton-based General Dynamics Electric Boat, for example, this week wrote state officials that approximately 1,000 employees had a minimum of $300 worth of taxes overwithheld from their checks.
Stamford Mayor Michael Pavia, a Republican, said several city employees last week, including his secretary, were hit.
"This has been a nightmare," DRS Commissioner Kevin Sullivan said. But, he said, "There is nothing we can do."
Sullivan said many withholding errors are caused by overtime or bonuses or accrued vacation pay.
"Their employer's payroll company put it into the highly sophisticated automated system, which proceeded to say they make this money every week, made this much this year, therefore they owe this much withholding," Sullivan said.
Sullivan said in other cases, despite DRS' attempts to publicize the retroactive tax, employers were slow to work with employees to adjust their withholdings to pay down the back taxes owed for the first seven months of the year. The later the adjustments, the higher the tax bite.
"Federal employees in the state of Connecticut, for reasons unknown, decided not to initiate catch-up withholding until mid-November," Sullivan said.
But some argue the Malloy administration should have anticipated the chaos.
"A retroactive tax increase will wreak havoc with any payroll system," said Michael Knight, a CPA in Fairfield. "You're cramming into four months what should have been (collected) in 12."
And Sullivan, in a November interview with Hearst Connecticut Media about the paycheck problems, acknowledged DRS initially issued "some imperfect guidance" on the retroactive increase.
Malloy spokesman Andrew Doba in a statement said, "We think that DRS is thoroughly managing a difficult situation."
The state does not seem able to correct the problems in its own payroll system.
Also in November, Hearst reported the tax withholding issues had impacted overtime earned by 1,500 state workers who cleaned up after the Oct. 29 nor'easter. Malloy's administration decided to remedy the situation by issuing $350,704 worth of refund checks.
Then, according to the state Comptroller, the Department of Corrections issued 4,500 of its staffers refund checks of about $250 a piece in December. Also, refunds were just issued to 119 National Guardsman for storm work.
Sullivan has been advising businesses that they, like the state, can return the money to affected employees. But he said DRS cannot force companies to do so and some workers may have to wait to recoup the funds in their tax returns.
"It's possible for people to file in January," Sullivan said.