JEFFERSON CITY, Mo. — Longstanding errors in tax withholding tables that were corrected in September could cost thousands of Missouri taxpayers on their state income tax returns for 2018, according to state officials.
Residents who expect to receive a modest refund on state income taxes could instead owe the state money, and those who do receive a refund could have it reduced by as much as 90 percent, The Columbia Daily Tribune reported .
A Missouri Department of Revenue analysis of 2,000 returns from single filers shows the average refund of $73.70 was replaced by an average payment owed of $64.99. For head-of-household filers — generally single taxpayers with children — the average refund was reduced from $156.07 to $17.61. A Nov. 30 email from House Appropriations staff to lawmakers, provided to the Tribune, said the department had not finished its analysis of how the changes would affect married couples because it “had turned into a nightmare so they didn’t have that available yet.”
The agency has mentioned the changes only in a news release issued in September that said the problem was caused by a longstanding, inaccurate calculation of the federal tax deduction that were not corrected until September. A department spokeswoman didn’t return requests for comment on Monday.
Missouri taxpayers have not been prepared for the likelihood they will owe money, said Democratic state Rep. Kip Kendrick, the ranking minority member of the House Budget Committee. He said the state could consider allowing an extended grace period to make payments without penalty.
Republican House Budget Committee Chairman Scott Fitzpatrick, who leaves to become state treasurer this week, said the change will be an inconvenience for some but “the average person is not going to see a thousand dollar swing.”
Fitzpatrick said the department has not widely publicized the change because it is still working to determine which taxpayers will see the biggest change in their liability.
Part of the issue is how the agency interpreted how federal tax changes made in 2017 will affect Missouri revenues. Congress doubled the standard deduction and eliminated the personal exemption. Missouri bases its income taxes on the federal system and allows a personal exemption only if one is available for federal filers.
In the past, taxpayers who minimized the number of dependents generally didn’t owe the state money when they filed. The changes in state withholding tables means those people should change their strategy on this year’s return.
“Now you should claim those dependents to not owe money,” Fitzpatrick said. “For people who didn’t change their elections after the tax changes occurred, having no dependents creates a liability.”
Fitzpatrick said the tax withholding changes should not impact the state budget because Missouri has enough growth for this year’s budget to be balanced.