Four years ago, Montana lawmakers made wholesale changes to the state tax system. Those reforms went into effect this tax season.
Connor Larson is a CPA with Colleen Black & Company in Billings. He says many of his clients wound up with an unexpected tax bill this year.
“We have noticed a lot of differences in what people were expecting and what we were kind of expecting based on doing their tax returns for the last 20-plus years."
Larson says the tax reforms reduced the default amount of tax coming out of many people’s paycheck.
“You might not notice a big difference if you're paid every week, every other week. It might be a difference in $25 a paycheck on your withholdings but when you look at that over a full year period for 26 paychecks, it's really amplified at the end of the year when you owe tax,” he says.
Larson says Montanans can update their W-4’s and increase their withholding amount to try to avoid a bigger bill next April.
Larson adds there were fewer tax credits and deductions, which may have also impacted how much you owe.
A 2021 analysis by the Montana Department of Revenue forecasted 1 in 5 households would owe more under the new law, with just under half of the state seeing a tax cut.
