ORDINANCE NO. 120514
Amending Chapter 68, Article VI,
Code of Ordinances, by repealing Section 68-386, Collection at source;
withholdings, and enacting in its place a new section of like number and
subject matter to require employers paying earnings subject to the earnings tax
to 250 or more of employees to submit earnings tax withholding returns and
supporting data by electronic filing, and amending penalty provisions for
employers who fail to comply with filing requirements.
electronic filing of various tax withholding returns is now customary in many
jurisdictions and is required by the Internal Revenue Service and the State of
Missouri for larger employers; and
electronic filing would reduce administrative costs for the City and enhance
collections of the earnings tax; and
WHEREAS, Kansas City
employers with 250 or more employees are accustomed to filing electronic tax
withholding returns with the Internal Revenue Service and the State of Missouri
and would not be unduly burdened by a similar requirement to electronically
file earnings tax withholding returns with the City; and
existing penalties for failure to file withholding returns or failure to file
timely or complete returns are inadequate to assure compliance by employers;
BE IT ORDAINED
BY THE COUNCIL OF KANSAS CITY:
Chapter 68, Article VI, entitled Earnings and Profits Tax, is hereby amended by
repealing Section 68-386, Collection at source; withholdings, and enacting in
its place a new section of like number and subject matter, to read as follows:
Sec. 68-386. - Collection at
maintaining an office or transacting any business within this city and making
payment of any earnings taxable under this article to a resident or nonresident
individual shall deduct and withhold from such earnings for each payroll period
of such individual one percent of such earnings as earnings tax. The employer
shall remit the amount of earnings tax withheld to the director in the manner
prescribed in this article.
Exempted employees. No employer shall be required to withhold the tax
due on any earnings paid to employees for whom the employer is not required to
withhold social security tax under the Federal Insurance Contributions Act.
Nonresident employers. Any nonresident employer making payment of any
earnings taxable under this article to a resident or nonresident who performs
services partly or wholly within the city, shall be subject to the provisions
of this article. Further any nonresident employer will subject itself to the
provisions of this article if it willingly withholds or opens a withholding
account with the city for tax due under this article from residents of the
Employer as trustee. Each employer, in collecting the tax, shall be
deemed to hold the withheld tax until payment is remitted to the city as
trustee for the city.
Accounting to director; returns.
Quarterly returns. On or before the last day of the month following the
end of each calendar quarter, each employer shall make a return to the director
setting forth the compensation received and earnings tax withheld from
employees. All returns shall be in a form prescribed by the director and shall
be subject to the rules and regulations prescribed therefor by the director.
For calendar quarters beginning on or after January 1, 2013 each employer
subject to this section paying earnings taxable under this article to 250 of
more employees in that calendar quarter shall file such quarterly return
electronically through the Internet in the manner prescribed by the
Commissioner of Revenue.
b. Annual returns. Each employer shall make to the director a
return for the preceding calendar year. All returns shall be in a form
prescribed by the director and shall be subject to the rules and regulations
prescribed therefor by the director and shall be accompanied by employee
records containing the employer ID number ("EIN"), the employee's
name, Social Security Number, city and state of residence, total wages earned,
wages subject to the city earnings tax and earnings tax withheld. To satisfy
this requirement, the employer may file the W-2 information provided to the
federal and state authorities for such year that includes this information. No
part of this provision shall be construed to require any taxpayer to furnish
the director with a copy of his federal or state income tax return. For annual
returns for calendar years 2013 and later, each employer subject to this
section paying earnings taxable under this article to 250 or more employees in
one or more calendar quarters during the year shall file such annual returns
and accompanying employee records electronically through the Internet in the
manner prescribed by the Commissioner of Revenue.
Due dates for annual returns. Employers shall make this return on or
before the last day of February, or the next succeeding day which is not a
Saturday, Sunday, or city holiday.
c. Fees for noncompliance (Years 2012 and earlier).
Late fees. To encourage the prompt and complete filing of returns,
whenever any return, as required by this section, has remained unfiled or
incompletely filed after the due date fixed for filing, a fee of one percent of
the annual amount withheld by the employer, up to a maximum of $1,000.00,
shall be imposed.
Improper format. An employer who fails to file this return in the format
prescribed by the director will be in violation of this section and will be
assessed a fee per employee record not filed in accordance with this section.
This fee will defray the city’s costs of converting this information into the
proper format and will be determined annually by the director.
The fees under this subsection shall apply to returns for tax periods
ending on or before December 31, 2012.
d. Penalties for noncompliance with filing requirements (Years
2013 and later).
the prompt and complete filing of withholding returns, whenever any return, as
required by this section, has after the due date, not been filed, not been
filed with all required information or employee records, not been filed with
correct information, or not been filed in the required format or by the
required method or medium, including electronic filing, the following penalties
shall be assessed:
1. If a correct return is filed within 30 days after the due
date, the penalty assessed is $30 for each employee for whom the employer was
required to withhold under this section, but the total penalties imposed for
all such failures during any calendar year shall not exceed $75,000.
If a correct return is filed more than 30 days after the due date but
within 150 days after the due date, the penalty assessed is $60 for each
employee for whom the employer was required to withhold, but the total
penalties imposed for all such failures during any calendar year shall not
If a correct return is not filed within 150 days after the due date, the
penalty assessed is $100 for each employee for whom the employer was required
to withhold, but the total penalties for all such failures during any calendar
year shall not exceed $500,000.
The penalties under this subjection shall apply to returns for tax
periods commencing after December 31, 2012.
e. Exceptions to penalty. The following are exceptions to the
penalties for noncompliance with filing requirements in subsections c and d.
The penalty will not apply to any failure that was due to reasonable
cause. This requires a showing that the failure was due to an event beyond the
taxpayer’s control or due to significant mitigating factors.
An inconsequential error or omission is not considered a failure to
include correct information.
Accounting to employees. Every such employer shall furnish each employee
on or before the last day of February, or the next succeeding day which is not
a Saturday, Sunday, or city holiday, of each year with the pertinent
information as described in subsection (4) of this section for the preceding
Remittance of earnings tax withheld. From and after January 1, 1994, any
employer who deducts and withholds the city earnings taxes from employees'
earnings shall remit to the director or the director's agent all earnings taxes
withheld from each payroll by the same due date prescribed by the state for the
remittance of income tax withheld on the payroll, with the exception of employers
who remit income tax withheld to the state on an annual basis. Those employers
must remit earnings tax withheld for each calendar quarter to the director or
his agent by the last day of the month following the end of the quarter.
Change in remittance schedule. An employer may petition the director, by
the method prescribed in the rules and regulations, to change the frequency
with which the employer remits earnings tax withheld under the following
The employer is not domiciled in the city and withholds tax on a
voluntary basis. The director is authorized to enter into agreements with such
employers to allow them to remit earnings tax withheld according to the
schedule for income tax withheld of the state in which the employer is
The employer has a city payroll schedule significantly different from
the payroll schedule of its other operations, and the city payroll is
significantly smaller than the payroll of its other operations.
Final return required. Any entity that ceases business and owes tax
under this article must make a final return to the director. This return shall
be subject to the provisions of this article.
Effect of failure to withhold or remit.
The failure of any employer to withhold the earnings tax when required
to do so by this section or to remit the amount of tax withheld to the director
or his agent in a timely manner shall subject the employer to liability for the
amount of the tax that should have been withheld or should have been remitted
and any penalties and interest with respect thereto. In addition the employer
is subject to the penalties set forth in sections 1-17 and 68-401 of the Code
Additionally, the failure of any employer to deduct or withhold at the source
the amount of tax due from the employee shall not relieve the employee from the
duty of making a return.
Approved as to form and legality:
Assistant City Attorney