TOPEKA — Kansans might want to scrutinize their paycheck stubs closely this month and next to make sure the correct amount of state withholding taxes is being deducted.
The Legislature raised individual income tax rates and put taxes back in place for limited liability corporations and sole proprietors. In response, the Kansas Department of Revenue issued new tax withholding tables that tell employers how much tax to take out of Kansans’ paychecks. Those tables take into account the fact the tax increase was retroactive to Jan. 1.
But there’s not an easy way to know if every employer in the state transitioned to the new state withholding tax tables, published in June to go into effect July 1.
“People should make sure that their employers are adjusting their withholding, that they’re implementing the new withholding tables that are available on our website,” said Rachel Whitten, spokeswoman for the Kansas Department of Revenue.
Whitten said KDOR doesn’t notify employers individually when new withholding tables are made available, but posts those tables on the state’s website at www.ksrevenue.org.
“It’s up to the employers to come, knowing that there is adjusted tax policy rates, and get those,” she said.
Kathleen Smith, KDOR director of policy and research, said notices about the tax changes have been published and employers should be aware of tax changes.
A call to human resources or to a company’s accounting firm should verify the tax tables have been updated, Whitten said.
Changes this year increased the former two-bracket individual tax system in Kansas to three brackets. For married filing joint and making $0 to $30,000 per year in taxable income, taxes increased from 2.7 percent to 2.9 percent; $30,001 to $60,000 increased from 4.6 percent to 4.9 percent; and $60,001 and up increased from 4.6 percent to 5.2 percent.
A 0.2 percent increase on someone making $30,000 per year in taxable income would up their annual state personal income tax bill $60, from $810 to $870.
Whitten said KDOR will release a new liability calculator in the near future that will help individuals determine what their increased liability is for the year.
“It’s not a withholding calculator,” she said. “It’s very imprecise, too, and it’s not intended to help be a tax preparation tool whatsoever. It’s intended to help people visualize what their liability might be.”
The Kansas state tax withholding tables also are available online, which would allow an individual to determine the approximate amount they should be paying, Whitten said.
To look at those tables, an individual would need to know their gross weekly or bi-weekly wages and their number of withholding allowances. In addition, pre-tax deductions would be subtracted from wages; that can include health insurance payments.
One of the challenges employers might face in updating tax tables could be delays in software company updates, said Alisa Snavely, tax director at Berberich & Trahan.
“Not all of the software, the payroll, companies are updating to those new tables,” she said.
If payroll software doesn’t begin taking out the higher amount of taxes included in the new tax tables right away, someone could be one to three months behind in Kansas taxes.
Stephen Sharpe, a spokesman for Intuit’s QuickBooks, a commonly used accounting software, said the company updated tax tables July 20.
“Typical frequency for updates would be a two-week cycle, but may vary based on pay system or other variable such as volume of changes,” said Kate Rankin, a spokeswoman for another well-known payroll program by ADP LLC.
The 2017 Kansas tax bill also included changes to deductions Kansans can use in the next few years, Snavely said, which will affect the taxes paid for some individuals, such as those who own homes and might have a mortgage deduction.
Medical expenses, which haven’t been deductible at all since 2013, will move from 50 percent deductible in 2018 to 75 percent in 2019 and 100 percent in 2020, she said.
“Mortgage interest, real estate taxes, personal property taxes, those are all at 50 percent right now,” Snavely said.
They stay at 50 percent through 2018, then jump to 75 percent in 2019 and 100 percent in 2020. Charitable contributions, which are 100 percent deductible, remain at the 100 percent level.
Kansans who have struggled to accurately assess their Kansas withholding, sometimes receiving federal tax refunds but paying Kansas taxes, might find their taxes align a little more closely as the deduction percentages change, Snavely said.
But she cautioned each individual’s tax situation is different, so it’s difficult to make generalizations.
Anyone concerned about whether enough is being withheld can consult an accountant or go to their employer and update their Kansas withholding form, the K-4, Snavely said. There is a space on that form to choose to have an extra amount, such as $5 or $10, withheld from each paycheck.
Lisa Carlton, administrative director of talent acquisition and total rewards at Stormont Vail Health, said they use a software package that updates the tax tables.
“When there is a change to state or federal taxes, we are notified by the software program when the new tax tables have been loaded and what changed,” she said.
“I definitely know our employees are noticing the difference in their paychecks as they have been asking questions,” said William Prohaska, Stormont payroll supervisor. “We sent an all-employee email stating state income taxes have increased/changed for everyone. I think because it was started mid-year and is retro back to Jan. 1, which is a bit unique, there is a potential for a little shock come tax filing for 2017.”