State lawmakers continued to grill the Department of Revenue Wednesday over its error in calculating state tax withholding tables that may play a role in lower refunds or taxes owed this spring.
A newly formed House committee met for the first time Wednesday to probe revenue department officials in a public hearing, questioning the department's efforts in communicating that some taxpayers may receive a lower refund this year or even owe taxes. The department discovered an error in its withholding tables this past summer and issued new tables in October to correct the error.
However, that error is one factor of a larger issue that department officials said will result in lower refunds. Department of Revenue Director Joel Walters said the Tax Cuts and Jobs Act passed in 2017 "fundamentally changed" W-4 tax forms, which is what dictates how much money is withheld from each paycheck for taxes.
Bottomline, Walters said, is that the change in W-4 form now means that lower refunds will be the "new normal" for taxpayers. The department has a call center and help line for those who may need assistance in paying their tax bill.
"We are very clear we need to work with taxpayers and individuals who need help as a result of the change," Walters said. "This will be a minority of people who have an issue, but those are important people and we stand ready to work with them."
Two weeks into the tax season, Walters said the average refund is $80 less than last year. The department has been pushing out information on its social media pages encouraging people to update their W-4 to ensure they are withholding the correct amount.
In Wednesday's hearing, as well as previous hearings Walters has testified at, legislators took issue with the lack of communication from the department about the potential tax impacts. Rep. Robert Ross, R-Yukon, said the department could have done more to let people know that they may be getting a smaller refund this year.
"I have a lot of taxpayers that weren’t aware this was coming," Ross said. "We’re going to have constituents losing their minds over this."
State revenues are down 7 percent this fiscal year compared to last year, but Walters and budget officials are hopeful that number will rebound as Missourians continue to file their taxes. Walters said the budget shortfall is now about $350 million, compared to $500 million a few weeks ago.
"We are starting to see the numbers level off a bit and we believe we'll still meet revenue projections this year," Walters said. "Other states are dealing with this phenomenon as a result of the federal tax changes."
Rep. Crystal Quade, D-Springfield, said this will have implications beyond that of the state budget. State employees can lose their jobs if they fail to pay their taxes, and Quade said this may create a hardship for them and put their jobs in jeopardy.
"People’s lives are going to be seriously affected by this," Quade said. "This goes beyond just the numbers, and I don’t feel any better today than when we first met four weeks ago."
Quade was dissatisfied with the department's communication efforts on social media, which only say that Missourians should check their W-4, not that they may receive a smaller refund. Walters said the department is being cautious about mass messaging because it's trying to specifically target those who will face a hardship and require assistance paying.
"We understand the new normal, we get that," Quade said. "But ultimately a lot of the legislators concerns are that the people who expect to get money back and now may not get it."
The committee met for an hour and a half on Wednesday and will continue the hearing with Walters next week.