The Kansas City 1% Earnings Tax, Explained

If you live or work in Kansas City, Missouri, you may owe a city tax that surprises a lot of newcomers: the 1% earnings tax.

Who owes it: Residents of Kansas City, Missouri owe 1% on their earned income, no matter where they work. Nonresidents owe 1% on the wages they earn for work performed inside Kansas City, Missouri city limits. Living in Kansas City, Kansas or another suburb doesn't exempt you from tax on work done in KCMO.

How it's usually paid: Most employers inside the city withhold it from your paycheck. You'll see it on your W-2 as local tax. If your employer withheld the right amount and you had no other earned income, you may not need to do anything else.

When you may need to file a return: If your employer didn't withhold it (common with remote jobs for out-of-town companies), if you're self-employed, or if you worked part of the year outside the city and had too much withheld. Residents and nonresidents use different city forms, and nonresidents who worked partly outside the city can often claim a refund for those days.

Self-employed and side income: Net profit from a business or gig work is also subject to the earnings tax for residents, and for nonresidents to the extent the work is done in the city.

Tips:

- Check boxes 18-20 of your W-2 for city wages and tax withheld.

- If you work from home for an employer outside KCMO, ask them to withhold the city tax, or set money aside.

- Keep a record of days worked outside the city if you're a nonresident claiming a refund.

Rules and forms change, so confirm current details with the City of Kansas City, Missouri Revenue Division or a tax preparer before you file.

- Robert Allen Bautista, independent tax preparer, Kansas City

Need help? See my tax and bookkeeping services, or book a free consultation.