1.2M tax returns have been filed in SC. Will those returns have to be amended?
Despite leaders voicing concerns over whether tax conformity could lead to tax increase in next year’s income tax filing season, the South Carolina Senate is poised to agree with the House and adopt deductions enacted in the federal One Big Beautiful Bill Act.
The Senate Finance Committee approved Tuesday the annual tax conformity bill moving it to the Senate floor. The legislation was passed by the House last week.
If approved, it would mean the more than 1 million income tax filers who have already submitted their state income tax returns to the S.C. Department of Revenue may have to amend their returns. The same would apply for those file between now and if and when Gov. Henry McMaster signs the legislation.
As of March 12, 1.2 million income tax returns had been filed with the state. Last year, the DOR received 2.8 million returns.
“If the Legislature passes H. 3368, the SCDOR will work to issue updated guidance to help affected taxpayers file their 2025 returns,” SC Revenue Deputy Director Ashley Thomas said in an email to The State.
Even if the legislation becomes law, what the guidance will mean for filers who already paid taxes owed or received refunds is unclear.
Tax conformity means the state adopts deductions accepted by the federal government. Among the new deductions for 2025 on federal returns are no taxes on $12,500 of overtime pay and $25,000 of tips.
Conforming to the federal tax code for 2025 would cost about $288 million. Lawmakers annually would adopt a tax conformity bill, but did not last year as they worked on a tax reform bill.
The tax conformity bill comes as the legislature has pushed tax cut legislation this year.
The Senate is pushing for a property tax cut for seniors, and both chambers have agreed on an income tax reform that would decouple the state from federal tax code for 2026 income taxes. Senate leaders had feared conforming for 2025 taxes would lead to an increase in taxes for 2026 filings.
State Sen. Sean Bennett, R-Dorchester, voted against moving forward with tax conformity.
“I just think this conformity this year, while it’s normally a pretty easy process, is not an easy process this year has a fiscal impact on us and not the right thing for us to do,” Bennett said.
Senate Finance Chairman Harvey Peeler said time is of the essence to pass tax conformity because of the upcoming April 15 deadline.
“Time is important. We owe it to the tax preparer we also add it to the taxpayer. April 15 is coming up,” Peeler said. “Taxpayers of this state don’t have time for squabbling between the House and the Senate of who did what (and) when,” Peeler said. “If I know anything about this Senate, if I know anything about this committee, we will do something to make it less harmful to the taxpayer in a year if there’s any harm.”
With less than a month remaining until the income tax filing deadline, Senators may have to decide on whether they want to have DOR adjust returns for filers who have already filed.
“It may be beneficial in one instance, it might not be beneficial to other. But putting the Department of Revenue on the autocorrect when they think it should be autocorrect, I think that would be bad policy,” said state Sen. Larry Grooms, R-Berkeley.
State Sen. Wes Climer, R-York, who is running for Congress, argued for the automatic corrections.
“It’s not a taxpayer changing things, the government has changed something, despite the taxpayer engaging in a good faith effort to comply with the law at the time of filing,” Climer said.
