HANCOCK REFUNDS ARE TAXABLE TO SOME MISSOURI TAXPAYERS

Nothing's free. Even Hancock Amendment tax refunds come at a price as far as the federal government is concerned.

Missourians who itemized deductions last year on their federal returns must include a percentage of their 1998 Hancock tax refunds as taxable income on this year's tax returns.

The Missouri Department of Revenue mailed 1099-G notices to these taxpayers listing the taxable amount of the refunds.

Carol Fischer, director of the taxation and collection division of the Revenue Department, said about 43 percent of each refund paid to these taxpayers is taxable for federal income tax purposes.

A taxpayer who received a total Hancock tax refund of $341 last year must list $148 of that amount as taxable income on this year's federal return.

Last year, Missouri issued state tax refunds for overpayment of taxes for 1995, 1996 and 1997.

The taxable percentage varied slightly from year to year, Fischer said. The percentage was 42.9 percent in 1995, 43.2 percent in 1996 and 44.3 percent in 1997.

It averages out to about 43 percent, she said.

Fischer said the Revenue Department calculated the taxable amount of each refund on the basis of federal income tax laws and reported the information to the Internal Revenue Service as well as taxpayers.

The 1099-G forms list both the taxable Hancock or Article 10 tax refund amount as well as the regular income tax refund or credit the taxpayer received.

The combined figure must be reported on 1998 federal income tax returns, Fischer said.

The state notices explain that the amount should be reported on federal form 1040, Line 10.

Fischer said the overpayment of state taxes benefited taxpayers who itemized deductions on federal returns. It reduced their federal liability, she explained.

As a result, the federal government views the Hancock tax refunds as taxable.

At the state level, it's a different story since taxpayers already overpaid their income taxes.