Do hybrid workers need to pay Kansas City’s 1% earnings tax? What to know, how to calculate

Tax Day is approaching, and some remote and hybrid workers have the chance to get money back from Kansas City.

The earnings tax, also called the e-tax, is a 1% tax that businesses, residents and workers pay to Kansas City to help fund many municipal services, including municipal trash collection. For individuals, the tax is on the amount of money you earn while living or working in the city.

Kansas City residents must pay the tax on their earnings, no matter where they work. But nonresidents only have to pay the tax on the money they earn within Kansas City. That means they can get some of their e-tax money refunded if they worked from home outside Kansas City for a portion of the previous year.

Last year, the city made it much more difficult to request these refunds, but earlier this month it reversed that policy. Now, requesting a refund is as easy as filling out a form online and providing documentation that you worked from home.

Is the earnings tax automatically deducted from my paycheck?

As a general rule, anyone employed by a business that is located in Kansas City will have this tax automatically withheld from their paycheck, tax expert Susie Mize told The Star. Mize is the site coordinator for the Johnson County Volunteer Income Tax Assistance (VITA) office, which helps low-income residents prepare their taxes.

However, Kansas City residents who work outside of city limits may have to pay the tax themselves. To avoid paying the earnings tax twice, carefully review your W2 form before filing.

Kansas City residents have to pay the full 1% earnings tax regardless of where they physically worked during the past year. Only nonresidents, meaning people who live outside of city limits, can get a partial refund for working from home.

How do I request a refund of some or all of last year’s earnings tax?

Workers who live outside of Kansas City and who worked from home during some or all of last year can request a refund for some or all of the earnings tax that their employer withheld.

If that sounds like you, you can file a refund request using Form 109 through the city’s tax portal, Quick Tax. The deadline to file this year is Tuesday, April 18.

City spokesperson Sherae Honeycutt told The Star that in order to file for this refund, you may need some or all of the following documents:

• W-2 showing KCMO tax was withheld by the employer

• Contact name, phone number and email address of employer to verify the days worked outside the city

• Travel logs of business travel taken during the tax period

• Letter or email from the employer verifying the taxpayer worked a specific number of days outside KCMO

• Calendar or excel sheet listing the days worked outside KCMO

• Telework agreement or payroll records showing telework days

She added that workers can’t count vacation days, sick days or holidays as days worked outside of Kansas City.

How much of the earnings tax do hybrid workers have to pay?

If you worked from home during some days and came into a Kansas City office on other days in 2022, city tax codes state that you will pay the earnings tax based on the number of days you worked in the city.

The city typically defines “days worked” as 260 days per year. Your days worked within Kansas City include both full and partial days worked within city limits — so a half day in the office counts as a full day for taxation purposes.

Here’s an example: if a Johnson County resident works 20 full days and six partial days in person in Kansas City during a typical year, that will count as a total of 26 days worked in the city. That’s one tenth of the total number of work days, so the worker will pay one tenth of 1%, or 0.1%, of their earnings toward the earnings tax.

Mize added that some hybrid workers may be paying the full 1% of their earnings to the city without realizing it, since Kansas City based employers withhold this amount from paychecks. In the example above, the worker could get 90% of this amount, or 0.9% of their total earnings, refunded.

You don’t have to pay the earnings tax on income you didn’t earn. That includes money you got from Social Security, pensions, retirement accounts and some other sources. Active duty military members and nonprofit organizations are also exempt from the earnings tax.

Do you have more questions about tax preparation in Kansas City? Ask the Service Journalism team at kcq@kcstar.com.