Nonresident businesses of Kansas City, Missouri have the option to voluntarily withhold the City's Earnings Tax for their employees. Providing this service will benefit employees who live in Kansas City, Mo., helping them comply with local tax obligations more easily.
The first step for nonresident businesses wishing to participate in voluntary withholding is to submit a Registration Application (Form RD-100). This form can be submitted electronically on Quick Tax (www.kcmo.gov/quicktax) or in person at the Business License Office at City Hall, 1st floor, 414 E. 12th St., Kansas City, Missouri 64106.
Once the application is processed, the appropriate tax accounts will be created, and you will receive a notice listing your tax account numbers. These numbers should be referenced when communicating with the Revenue Division.
It's important to note that any nonresident employer voluntarily withholding the City’s earnings tax will be subject to the provisions of the City’s Code or Ordinances, Chapter 68, Article VI and the Earnings Tax Regulations. Additionally, the employer is obligated to withhold for both resident employees who live in Kansas City, Mo. and nonresident employees who work within the City.
Once the withholding account with the City is established, employers are required to deduct the earnings tax on wages and salaries paid to residents of Kansas City, Missouri and nonresidents performing services within Kansas City, Mo.
For employees residing in the City limits of Kansas City, Mo., 100% of the taxable wages are subject to the withholding tax. As such the employer must withhold the one percent earnings tax on all salaries and wages.
For employees who are nonresidents of the city, withholding is required on the portion of the compensation attributable to services rendered, work performed, or other activities engaged in within the City.
In general, according to Kansas City MO Earnings Tax Regulations, taxable earnings include gross compensation less contributions to cafeteria plans and qualified deferred compensation plans, similar to the amount used to calculate Box 1 of Form W-2 for federal income tax purposes. The withholding tax is to be remitted to the City at the same frequency used for state income tax withholding purposes. Remittances can be made electronically on Quick Tax – kcmo.gov/quicktax.
Where a nonresident receives compensation for personal services rendered or performed partly outside the city, the employer shall deduct, withhold, and remit the tax on that portion of the compensation which is earned within the city in accordance with the rules of apportionment detailed in the Earnings Tax Regulations.
When calculating the amount to withhold, apply the 1% earnings tax rate to the taxable earnings for work performed in Kansas City. For employees who work partially in the city, the business will need to determine the proportion of work done in Kansas City and apply the tax to that portion of their earnings.
Employers have several options for apportioning the compensation of nonresident employees:
1. Based on the preceding year's experience for the job or position,
2. Based on the actual location the employee works on any given day, or
3. Withhold on all taxable earnings for employees who work partly within and partly outside of Kansas City, Missouri. – when this method is used, employees would have to request a refund for time worked outside of the City.
Employers who withhold earnings tax on only a portion of the compensation of a nonresident must maintain adequate and contemporaneous records to support the apportionment for a period of five years.
In addition to regular remittances, Form RD-110 must be filed quarterly to report the taxable earnings paid. The return is required even if there was no withholding during the quarter. Payments can be made with Form RD-110 for amounts not previously paid through prior remittances. Beginning January 1, 2021, Form RD-110 must be filed electronically. Employers can use Quick Tax or the Bulk Filing Program through a third-party payroll provider. Failure to file electronically may result in filing penalties.
After the end of each year, employers are also required to file a reconciliation of annual withholdings to payments remitted - Form RD-113. The return is due by January 31. W-2 information is also required to be submitted at the same time. W-2 information should only be provided for employees who had earnings tax withheld from their compensation. Beginning January 1, 2021, Form RD-113 and W-2 records must be filed electronically. Employers can use Quick Tax or the Bulk Filing Program through a third-party payroll provider.
Tips
- Remittance due dates are published annually. Be sure to check these dates and mark them on your calendar to ensure timely filing.The due dates are posted at kcmo.gov/tax.
- Employers that fail to submit Form RD-113 or W-2 records, or fail to file them electronically are subject to a penalty. The penalties mirror those charged by the Internal Revenue Service.
Resources
For more detailed information, refer to the following resources:
- Code of Ordinances, Chapter 68, Article VI
- Earnings and Profits Tax Regulations
- Earnings Tax Magnetic Media and Electronic Filing Specifications
Here are key dates to remember throughout the year:
January
31 - Employer's Quarterly Return of Earnings Withheld (Form RD-110) - 4th Quarter, previous year
31 - Employer's Annual Reconciliation of Earnings Withheld (Form RD-113)/ previous year W-2 Information
April
15 - Profits Earnings Tax (Form RD-108/ 108B) and Extension (Form RD-111), calendar filers
30 - Employer's Quarterly Return of Earnings Withheld (Form RD-110) - 1st Quarter
July
31 - Employer's Quarterly Return of Earnings Withheld (Form RD-110) - 2nd Quarter
October
31 - Employer's Quarterly Return of Earnings Withheld (Form RD-110) - 3rd Quarter
Note: If any due date falls on a weekend or holiday, the deadline is extended to the next business day. Always verify current due dates with the Kansas City Revenue Division, as they are subject to change.
By following these guidelines, nonresident businesses can effectively manage voluntary withholding of Kansas City, MO Earnings Tax for their employees, ensuring compliance and providing a valuable service to their workforce.
We appreciate your voluntary withholding and continued compliance. If you have any questions, please do not hesitate to contact us at revenue@kcmo.org or 816-513-1120
