Hiring Your First Employee in Kansas City: Missouri and Kansas Payroll Basics
Kansas City small businesses straddle two states, and that makes a first hire a little more complicated than the national checklists suggest. Here is the local version: what to register, where, and what is different on each side of State Line Road.
Everywhere: the federal basics
EIN from the IRS
Form W-4 and Form I-9 for each new hire
Withhold and deposit federal income tax, Social Security and Medicare, plus your employer match
File Form 941 quarterly, Form 940 yearly, and W-2s by January 31
The full federal checklist, with IRS sources, is in Hiring Your First Employee: The Payroll Tax Checklist.
If your business is in Missouri
Register with the Missouri Department of Revenue for state income tax withholding.
Register for Missouri unemployment insurance with the Missouri Division of Employment Security.
Report new hires to the state, generally within 20 days.
Workers' compensation: Missouri generally requires coverage once you have five or more employees (one or more in construction). Check the current rules for your industry.
Kansas City, Missouri earnings tax: employers generally must withhold the 1% city earnings tax for employees who live in KCMO or work inside city limits, and file the city's withholding returns.
If your business is in Kansas
Register with the Kansas Department of Revenue for state withholding.
Register for Kansas unemployment insurance with the Kansas Department of Labor.
Report new hires to the state, generally within 20 days.
Workers' compensation: Kansas generally requires coverage once annual gross payroll exceeds a set threshold. Confirm the current limit before your first payroll.
Employees who live in the other state
A Kansas business with a Missouri-resident employee (or the reverse) usually withholds for the state where the work is performed. The employee then sorts out the credit on their home state return. If someone works in both states, payroll should split the wages. My guide State Line Taxes in the KC Metro explains the employee side.
Practical advice for first-time employers
Use a payroll service. It is cheaper than one late-deposit penalty.
Open a separate account for payroll taxes so withheld money is never spent.
Keep I-9s in a separate file from personnel records.
Calendar every filing deadline in January for the whole year.
General information, not tax or legal advice for your specific situation. Confirm current requirements with the IRS, the Missouri and Kansas departments of revenue and labor, and the City of Kansas City, Missouri.
About the author
Robert Allen Bautista is a Kansas City tax preparer and accountant. He spent four years at PwC in IT audit and tax, served as Chief Accountant at a CPA firm, holds an M.S. in Accounting, and is a CPA candidate. He has worked with 350-plus individual and small business clients and writes plain-English tax guides in English and Spanish.
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