Tax preparers are advising Missouri residents to double check their income tax withholdings, because the state has what it calls a “longstanding inaccurate calculation.”
Essentially, some Missouri taxpayers may see a smaller refund or owe more on their 2018 tax bill than in previous years.
The Missouri Department of Revenue said late last month that it discovered the error, tied to a state deduction that Missouri taxpayers can take on federal taxes, after Washington enacted new tax cuts.
But, the agency cautioned, the issue will not impact the amount taxpayers owe on their 2018 taxes.
“Any time changes are made at the federal level, states can expect there will be a need to make some adjustments,” Department of Revenue Director Joel Walters said in a news release. “Updating the state’s tax tables is necessary to ensure enough money is being withheld to protect taxpayers from owing more or receiving less back than they are expecting when they file their tax returns in the spring.”
It may be too late for taxpayers to fix their 2018 withholdings, according to Nathan Rigney, lead tax research analyst with the Tax Institute at H&R Block.
“The most important thing right now is for taxpayers to go figure out just how this change may affect them, and if they need to make changes to the federal W-4 that will fix the Missouri W-4,” Rigney said. “Then, they need to consider setting some money aside so that they can pay any extra balance.”
The accuracy of Missouri withholding depends on the accuracy of federal withholdings, he said.
“The way that they were doing in the past probably didn't resulting in significant inaccuracies for Missouri tax purposes. But this year, because there were so many federal tax law changes that are not accounted for in the new federal W-4, individuals really had to go figure out how to recalculate their number of allowances they should be claiming on their federal W-4,” he said, “and most people didn't do that.”
A Department of Revenue spokeswoman said officials are still studying the situation and a third party is reviewing the updated tax tables. Rigney advises taxpayers use online calculators, such as the one offered by the IRS, to find the proper amount that should be withheld from paychecks.
Samuel King is the Missouri government and politics reporter for KCUR. Email him at email@example.com and follow him on Twitter: @SamuelKingNews