If your small business has employees working in Kansas, you’ll need to withhold and pay Kansas income tax on their salaries. This is in addition to having to withhold federal income tax for those same employees. Here are the basic rules on Kansas state income tax withholding for employees.
With rare exceptions, if your small business has employees working in the United States, you’ll need a federal employer identification number (EIN). You should obtain your EIN as soon as possible and, in any case, before hiring your first employee. EINs are issued by the IRS and you’ll need one first and foremost for federal taxes. In addition, some states use the federal EIN for state withholding tax purposes. Other states (like Kansas) issue separate state tax ID numbers Kansas’s tax ID number is based on the EIN but adds some digits before and after. You should have your EIN to register with the state (see below). You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.
Apart from your EIN, you also need to establish a Kansas withholding tax account with the Kansas Department of Revenue (KDOR). You set up your account by registering your business with KDOR either online or on paper. To register online, go to the Business Tax section of the KDOR website. If you register online, you will receive an account number and printable registration certificate immediately. To register on paper, use Form CR-16, Business Tax Application. You can download blank forms from the Business Taxation Forms and Publications section of the KDOR website. You can submit the completed application by regular mail, fax, or hand delivery to KDOR’s assistance center. If you register on paper, you should receive your account number and certificate in 3-4 weeks. There is no fee to register your business with KDOR for withholding tax purposes.
All new employees for your business must complete a federal Form W-4 and also should complete the related Kansas Form K-4, Kansas Withholding Allowance Certificate. If an employee does not complete a Form K-4, you must withhold wages at the single rate with no allowances. You can download blank Form K-4s from the Withholding Forms and Publications section of the KDOR website. You should keep the completed forms on file at your business and update them as necessary.
In Kansas, there are five possible payment schedules for withholding taxes: quad-monthly, semi-monthly, monthly, quarterly, or annually. Your payment schedule will depend on the average amount you withhhold from employee wages over time. The more you withhold, the more frequently you’ll need to make withholding tax payments.
The exact threshold dollar amounts for the different payment schedules, as well as other rules, may change over time, so you should check with KDOR at least once a year for the latest information.
Here are the due dates for the various payment schedules:
If a due date falls on a Saturday, Sunday, or legal holiday, use the next regular workday.
Submit your withholding tax payments with a Form KW-5, Withholding Tax Deposit Report. You must file a deposit report for every reporting period even if no tax is due. All Kansas businesses are required to file and pay withholding tax electronically. You have two options for electronic filing: WebTax for online filing or TeleFile for filing by phone. Both systems rely on electronic funds transfer (EFT) for payments. You will have to complete a Form EF-101, Authorization for Electronic Funds Transfer, to authorize EFT payments to KDOR.
The DOR provides several different methods for calculating how much tax to withhold. For more information, check KDOR’s Publication KW-100, Kansas Withholding Tax Booklet (Guide to Kansas Withholding Tax). The guide is updated every year. You can download a copy from the Withholding Forms and Publications section of the KDOR website.
After the end of the year, you must file an annual reconciliation with KDOR that summarizes the employee taxes you’ve withheld during the year. The annual reconciliation is in addition to providing each of your employees with a federal Form W-2 summarizing the employee’s withholding for the year. Use Form KW-3, Annual Withholding Tax Return. (Note: For employers on an annual payment schedule, the annual reconciliation Form KW-3 is not a substitute for the annual deposit report KW-5; both must be filed.) You must include copies of the W-2s sent to all of your employees working in Kansas with your KW-5. The annual reconciliation and copies of W-2s must be filed electronically using the WebTax system.
The annual report and W-2s are due on or before the last day of February. As with tax payments, if that date falls on a Saturday, Sunday, or legal holiday, use the next regular workday.
This article is only concerned with employees, not independent contractors. In general, different tax rules apply to independent contractors.
You may decide that it’s easiest to hand over responsibility for payroll, including withholding taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.
This article touches on only the most basic elements of Kansas employee withholding taxes. Under Kansas law, officers and directors of a corporation, like sole proprietors and partners, are personally liable for the Kansas withholding tax, penalty, and interest due during the period they hold office. Avoid possible penalties for making mistakes by checking both the IRS and KDOR websites for the latest information. You also can get more information about small business tax issues in other articles here on Nolo.com.