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March 22, 2018
2018-0629

Missouri issues updated 2018 withholding guide and MO W-4 reflecting further changes due to TCJA

The Missouri Department of Revenue has issued an updated 2018 Employer's Tax Guide, reflecting further changes made for 2018 to the state's income tax withholding worksheets and tables resulting from conformity with the federal Tax Cuts and Jobs Act (TCJA). (Posted to the department's website.)

In addition to the Missouri Employer's Tax Guide, the withholding tax tables, withholding tax calculator and Form MO W-4 are updated.

Employees should be encouraged to review their Missouri income tax withholding to confirm the appropriate amount is withheld for 2018. In the event the IRS makes any additional changes that affect these calculations, the guide will again be updated.

Missouri annual standard deduction increases for 2018, personal allowances eliminated

The revised annual standard deduction amounts for 2018 are as follows:

— Single: $12,000 (up from $6,500)

— Married and spouse works: $12,000 (up from $6,500)

— Married and spouse does not work: (this is determined by the check box on Form MO W-4, Line 2, and is not a separate filing status): $24,000 (up from $13,000)

— Head of household: $18,000 (up from $9,550)

Note that the Missouri Department of Revenue is following federal law and, as a result, there are now no allowances. Previously, an allowance of $2,100 for single and married, and $3,500 for head of household, applied.

For the 2018 withholding tax formula, go to pages 16-17 of the Missouri Employer's Tax Guide.

Supplemental Wages

As we previously reported, the 2018 supplemental rate of income tax withholding is 5.9%, down from 6%, due to Missouri legislation enacted in 2014 (SB 509) providing that the maximum state income tax rate would incrementally decrease by 0.1% each year for five years until the highest rate reaches 5.5%. If supplemental wages are paid (such as bonuses, commissions, severance pay, overtime pay, back pay, including retroactive wage increases, or reimbursements for nondeductible moving expenses) in the same payment with regular wages, withhold Missouri income tax as if the total of the supplemental and regular wages were a single wage payment for the regular payroll period.

If supplemental wages are paid in a payment separate from regular wages, the method of withholding Missouri income tax depends in part on whether you withhold income tax from the employee's regular wages. If you withhold Missouri income tax from the employee's regular wages, you may choose one of two methods for withholding income tax on the supplemental wages:

1. Withhold a flat percentage rate of 5.9% of the supplemental wages, using zero withholding allowances; or

2. Add the supplemental wages to the regular wages paid to the employee within the same calendar year for the payroll period and determine the income tax to be withheld as if the aggregate amount were one payment. Subtract the tax already withheld from the regular wage payment and withhold the remaining tax from the supplemental wage payment.

For more information on Missouri withholding tax, see the Department's website.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Advisory Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Debbie Spyker (deborah.spyker@ey.com)

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