Employers, payroll providers and tax professionals will see a big change in their South Carolina taxes beginning January 1.
For the first time in 25 years, the South Carolina Department of Revenue (SCDOR) will update the state’s Withholding Tax tables.
SCDOR Director Rick Reames told South Carolina Radio Network the tables are being updated because many are having too much withheld now. “Taxpayers are essentially loaning their money to the government throughout the year interest-free,” he said.
Reames said because too much is withheld initially, the state then must turn around and return this money in the form of income tax refunds.
“By simply updating the state’s withholding tables annually, we will put $1 billion back in people’s paychecks over the next 10 years,” he said.
Reames said that over-withholding has led to a steady growth in state income tax refunds, which now average approximately $840 per person. While he said updating the tables will ultimately lead to smaller refunds, taxpayers will keep more of their initial paycheck money throughout the year. Smaller refunds also help reduce the potential for and impact of tax refund fraud, a nationwide problem that the SCDOR is working hard to mitigate.
Reames said under the new method it does not mean everyone will have to send a check to the state because not enough was withheld. “One of the things we’re doing on these changes is phasing them in over a number of years. Because we wanted to avoid that scenario,” Reams said.
On January 1, 2017 the new withholding tables must be implemented in payroll systems across South Carolina. Updated tables are available on the SCDOR website at dor.sc.gov/withholding. The tables will now be updated annually.