Be Honest with Missourians about tax withholds

By Nicole Galloway, CPA

Missouri State Auditor

When Missourians filed their taxes this year, they probably didn’t spend a lot of time thinking about money that had been held back from their paychecks. Since these withholding amounts hadn’t changed much before, why be concerned?

It turns out there was reason to be worried. Over the past year, the Department of Revenue quietly made several changes to the state’s individual income tax withholding tables, impacting paychecks and the bottom line for many Missouri taxpayers when it came time to file their taxes with the state. And, as I found out in a recent audit, at least one of the tax changes the administration made was unlawful.

First, the good news from the audit. Because my previous audit on the timeliness of tax refunds called attention to the increasing delays taxpayers had in getting refunds, there have been improvements. In fiscal year 2018, 80 percent of total refunds were paid by early May, as opposed to it taking until late June in 2016 and 2017 to reach the same point.

That’s how it should be – taxpayers getting the money they are owed from the government in a timely manner, and with any interest owed. Unfortunately, the administration’s handling of withholdings is another issue.

The decisions made by the Department of Revenue about withholdings affect the money coming out of our paychecks – a real impact on our daily lives. That’s why it is so important any changes to withholdings take place transparently, so taxpayers clearly understand how their bank accounts will be affected.

During the course of the audit, my team found multiple changes were made, yet the administration failed to effectively inform the public.

As a result, not only could taxpayers expect to pay an additional $134 million when they filed this year, there will be $232 million less in tax refunds. That’s a nearly $400 million impact on taxpayers they weren’t expecting.

The vast majority of taxpayers only learned of this when they filed their returns. While Department of Revenue officials took the time to contact employers and a few payroll agencies directly about the changes, they left individual taxpayers in the dark.

Despite bipartisan calls for answers, the Parson administration attempted to downplay taxpayers’ concerns. After consistently referring to an ongoing “error,” their story changed, leaving taxpayers with more questions than answers. Lawmakers from both sides of the aisle have made it clear they’ve had it with the administration’s mistakes, evasion and attempts to cover up the truth.

Even after all of this, the Department of Revenue continues to operate in secrecy. Additional changes made in January will result in over-withholding for the majority of individual taxpayers. An additional $63 million is expected to come out of the paychecks of Missourians, affecting over half of taxpayers – primarily middle- and lower-income families.

Under state law, the modifications to the withholding formula should have been approved through the rulemaking process. This would have given elected officials notice of the changes and the opportunity for input, and more importantly, allowed for notice and comment from the public – the very taxpayers affected by the change. Instead, the Department of Revenue didn’t follow the law.

On March 8, the   Department of Revenue received the draft report of this audit. Less than a week later, the Governor announced the resignation of the Department of Revenue director. The Governor’s statement didn’t acknowledge the ongoing problems and failed to take responsibility for these mistakes.

The decision to take more money out of paychecks without following the law shows a clear pattern of mismanagement. And the resignation of one unelected bureaucrat does not equate to accountability.

This Tax Day, I’m calling on the Parson administration to treat taxpayers with the respect they deserve by being candid about what changes are made and exactly how they will affect Missourians’ paychecks.

It should be simple: follow the law, get it right and stop misleading taxpayers.