Friday, February 15, 2019

Deaton: Accountability must be demanded from Department of Revenue

(From Rep. Dirk Deaton, R-Noel)

The Special Committee on Government Oversight held its first meeting this week to investigate why personal income tax collections for the state have been down in a seemingly robust economy.

It appears that income tax collections will rebound over the next couple of months as Missourians file their taxes. This is due to an error and changes to the federal tax code. Unfortunately, this will lead to what the Chairman, Rep. Robert Ross, (R-Yukon) described as a coming “April surprise” for taxpayers.

The Department of Revenue admits to having an error in their formula for withholding tables. The error has since been corrected for 2019, but before being corrected this caused an under collection to have occurred in state income tax withholding for 2018. 

For example, this error would amount to the under collection of state income tax of $3 per check for someone making $30,000 per year. 

On top of that, the Tax Cut and Jobs Act which Congress passed and took effect January 1, 2018 fundamentally altered how W-4 forms calculate the withholding amount due to changes in the tax law regarding the standard deduction and personal exemptions. 

The result is actually a more accurate withholding throughout the year as to what the true tax liability of a taxpayer will be. That said, these two things together will likely result taxpayers seeing lower refunds, or even a tax liability for the 2018 tax year.

Going forward the Department of Revenue has assured us they have corrected the formulaic error that related to withholdings. 

However, the changes in the tax law will continue to affect withholdings in all future tax years. If a taxpayer’s refund is smaller than they would otherwise like, they can contact their employer to change their W-4. Both the Missouri Department of Revenue W-4 and the IRS W-4 have a place where you can request an additional amount be withheld from each check.

I want to make sure all Missourians know that their overall tax liability is down in terms of the percentage of their income. This is true, even if your refund is less than you expected, or if you owe. 

The federal government, as well as the State of Missouri, has cut the personal income tax. Due the Department of Revenue’s error and how the tax changes interplay with the W-4 form, income tax withholding is less.

While overall Missourians are paying less income tax, I fully expect many will be furious. I completely understand and even share a level of anger as it relates to this issue. The Department of Revenue made a mistake and then failed to properly communicate how tax changes would affect the amount of income tax withholding. Both of these are unacceptable and accountability must be demanded.

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