Press Releases

Taxpayers Urged to Check With Employers About Withholding

State and federal tax changes may lower or eliminate refunds for some

June 18, 2003

BATON ROUGE - The Louisiana Department of Revenue is urging taxpayers to check with their employer to ensure the amount of tax being withheld from their paycheck is adequate to cover their state tax liability due next income tax season.

Revenue Secretary Cynthia Bridges points out that federal and state tax changes this year could mean some taxpayers will not get their usual refund if their employer is not withholding the correct amount of tax from their paycheck. “As you know, the constitutional amendment passed by voters last November increased income tax rates, while at the same time decreasing sales tax rates on certain items,” Bridges says. “Some companies did not change their withholding rates on January 1, 2003, but are planning to implement the changes on July 1, 2003. This means that some taxpayers who normally get a refund may in fact not see that refund unless they increase their withholding to make up the difference.”

Bridges says taxpayers also need to consider increasing their withholding because of the recent federal tax decrease passed by Congress. “Federal taxes are deductible on the state income tax return,” she points out. “Paying less federal tax means a lower deduction on the state return. This in turn will increase the state tax liability by a few dollars.”

Another reason it is important for taxpayers to check their withholding is the quarterly declaration of estimated tax requirement. “A taxpayer must make a declaration of estimated tax if their estimated Louisiana income tax after credits and taxes withheld can reasonably be expected to exceed $1,000 for an individual and $2,000 in the case of a joint declaration of husband and wife,” Bridges says. She points out that payments of estimated taxes must be made in full with a declaration or in four equal installments on or before April 15, June 15, and September 15 of the tax year, and January 15 of the following year. The penalty for underpayment of any installment is 12 percent per year for the period of underpayment on the difference between the installment payment made and 90 percent (66-2/3% in the case of farmers) of the installment due on the basis of the tax for the year. “If a taxpayer’s withholding amount is too low, there exists a possibility that the taxpayer could be required to file declarations of estimated tax and not know it. This, of course, would result in the penalty if they failed to file those required declarations of estimated tax,” Bridges says.

“The main goal of this informational initiative is to convince taxpayers to check with their employer and make sure the amount of their withholding tax is enough to avoid any possibility of being required to pay a penalty for failure to file quarterly declarations of estimated tax.”

###