Operational Gaze:
How to Run Payroll in Kansas?

April 13th 2024

Navigating payroll in Kansas involves adhering to both state and federal laws. Employers must meticulously manage tax withholdings, report earnings, and ensure compliance with labor standards. This process, crucial for both business integrity and employee satisfaction, requires attention to detail. This comprehensive article aims to simplify these complexities, providing Kansas employers with a clear, step-by-step guide to running payroll efficiently and accurately.

This Article Covers

Laws That Affect Payroll Procedures in Kansas
Worker Classifications in Kansas
Payroll Forms and Relevant Bodies in Kansas
Applicable Taxes in Kansas
Key Pay Elements That Impact Payroll in Kansas
Step-by-Step Guide to Payroll in Kansas

Laws That Affect Payroll Procedures in Kansas

Kansas Laws

Here are some of the key laws and regulations that affect employers and employees in Kansas:

  • Kansas Income Tax Withholding: Employers operating in Kansas are mandated to withhold state income tax from their employees’ wages systematically. The withholding rates are variable, contingent upon the employee’s earnings level and the personal exemption information accurately provided on the Kansas W-4 form. Employers are legally obligated to remit these taxes diligently to the Kansas Department of Revenue on a designated regular basis, with the frequency—either monthly or quarterly—determined by the employer’s cumulative tax liability.
  • Kansas Employment Security Law: Under this law, Kansas employers contribute to the state’s unemployment insurance fund. The contribution rate is determined annually and is based on factors such as the employer’s industry, the balance of the state’s unemployment fund, and the employer’s history of unemployment claims. Additionally, employers are required to accurately report employee wages and pay the unemployment insurance tax quarterly.
  • Kansas Workers’ Compensation Act: Employers in Kansas are mandated to have workers’ compensation insurance if they have gross annual payrolls exceeding $20,000 or employ one or more full-time or part-time employees. This insurance provides benefits to employees who are injured on the job or develop a work-related illness. The employer’s insurance premium is based on the classification of the work their employees perform and the employer’s claims history.

Federal Laws

As compared to state-mandated laws, federal laws provide a nationwide framework for payroll procedures that must be adhered to by employers in Kansas and across the United States.

  • Fair Labor Standards Act (FLSA): The FLSA is a federal law that sets standards for minimum wage, overtime pay, recordkeeping, and youth employment. As of the last update, the federal minimum wage is $7.25 per hour, although employers in Kansas must comply if state minimum wage laws dictate a higher amount. Overtime must be paid at a rate of at least one and one-half times the employee’s regular rate for hours worked beyond 40 in a workweek.
  • Family and Medical Leave Act (FMLA): The FMLA sets out provisions for leave entitlement. Eligible employees have the right to take up to 12 weeks of unpaid leave for events such as childbirth, adoption, or the care of a family member with a serious health condition.
  • Federal Insurance Contributions Act (FICA): The FICA requires that employers deduct Social Security and Medicare taxes from paychecks and also make a matching contribution. As of the current information available, the Social Security tax rate was 6.2% for the employer and 6.2% for the employee on earnings up to the applicable taxable maximum amount. Medicare tax was 1.45% each for both employer and employee, with an additional 0.9% for high earners.
  • Federal Unemployment Tax Act (FUTA): FUTA imposes a federal payroll tax on employers to help fund state unemployment agencies. Employers pay this tax annually, and it is calculated at 6% of the first $7,000 paid to each employee as wages during the fiscal year. Significantly, employers can receive a credit of up to 5.4% for making timely and full payments of state unemployment taxes, effectively reducing the FUTA rate to a more manageable 0.6%.

HR Laws

While HR laws encompass a broad range of topics, certain laws impact payroll procedures:

  • Equal Pay Act (EPA): The EPA requires that men and women in the same workplace be provided with equal pay for equal work. However, note that the jobs do not need to be identical, but they must be substantially equal. Payroll systems must be designed to ensure compliance with this law, and regular audits are often necessary to prevent and detect disparities.
  • New Hire Reporting: This requirement aids in the enforcement of child support orders. Employers must report newly hired employees to a state directory within 20 days of the hire date. This information is then used by the state to locate individuals for child support purposes.

Worker Classifications in Kansas

The classification of workers is a pivotal component of employment law and tax regulation, which determines how workers are defined under the law and has implications for employers in terms of tax liabilities, compliance with employment laws, and provision of benefits. In Kansas, workers are categorized as either employees or independent contractors. This distinction is not just a formality; it shapes the obligations that an employer has towards those who work for them.

Employees and Independent Contractors

In Kansas, as in other states, the distinction between an employee and an independent contractor is significant, as it determines tax obligations, eligibility for benefits, and legal responsibilities. Understanding these classifications helps employers comply with labor laws and tax regulations while providing workers with their rightful entitlements.

Common Law

Under “Common Law” rules, the primary factor that distinguishes an employee from a contractor is the degree of control the employer/company has over the work being done. For someone to be considered an employee, the employer must have the right to control not only the result of the work but also the means and methods by which the result is accomplished. If the employer dictates when, where, and how work is done, this suggests an employer-employee relationship.

On the other hand, independent contractors are usually engaged in a business/profession where they offer services to the public. The more control an individual has over the work process, schedule, and methods, the more likely they are to be classified as an independent contractor.

Modified ABC Test

Kansas utilizes a version of the ABC test, particularly for unemployment insurance purposes, which offers a clearer definition that can differ from federal IRS guidelines. The ABC test is designed to ensure that employers do not misclassify employees as independent contractors to avoid paying related taxes and insurance. For a worker to be considered an independent contractor under the “Modified ABC Test” in Kansas, three conditions must be met:

  • Absence of Control: The individual must be free from control or direction in the performance of the overall services, both under the terms of the employment contract and in actual practice.
  • Business or Trade: The individual must be customarily engaged in an independently established trade, occupation, profession, or business related to the services performed.
  • Outside Usual Course of Business: The service provided must be outside the usual course of business for which the service is being performed or that the service is performed outside of all the places of business of the enterprise for which the service is performed.
  • A person must satisfy all these three components to be classified as an independent contractor. Failure to meet any one of the criteria would likely result in being categorized as an employee.

To learn more about the rights of salaried and hourly employees, you can read our guides on your rights as a salaried employee in Kansas and your rights as an hourly employee in Kansas.

Payroll Forms and Relevant Bodies in Kansas

Navigating payroll procedures requires a solid understanding of the relevant forms and regulatory bodies. In Kansas, as in all states around the country, these elements are critical for ensuring the correct handling of employee compensation, tax withholdings, and adherence to legal standards. Employers bear the responsibility for proper documentation and timely submissions, which necessitate a clear understanding of the following forms and agencies.

Kansas Payroll Forms

In the state of Kansas, several specific forms are integral to the payroll process, providing a structured approach to tax and wage reporting. These forms include the following:

  • K-4 Form: Analogous to the federal W-4, the Kansas Employee’s Withholding Allowance Certificate, or K-4, lets employees indicate withholding preferences. This is crucial for employers to accurately withhold state taxes in accordance with each employee’s personal tax situation.
  • KW-5 Form: Employers are required to utilize the KW-5 form to regularly remit the state taxes that have been withheld from employees’ wages. Timely and accurate completion of this form ensures compliance with state tax collection schedules, which can be monthly or quarterly.
  • K-CNS 100: This form serves as a quarterly wage report for employers, which is instrumental for the DOL to manage the unemployment insurance program. Proper reporting on the K-CNS 100 supports the integrity of the unemployment insurance fund and the state labor market.

Federal Payroll Forms

Alongside Kansas-specific documentation, federal payroll forms are equally important:

  • Form W-4 (Employee’s Withholding Certificate): The Form W-4, or Employee’s Withholding Certificate, is a federal document that employees across the United States fill out to inform employers about how much federal income tax should be withheld from their wages. The Form W-4 takes into account various factors like marital status, dependents, and additional income to tailor the withholding to the employee’s unique tax situation. With periodic updates, especially after major life events or changes in financial circumstances, the W-4 ensures that employees neither overpay nor underpay the federal income taxes throughout the year.
  • Form W-2 (Wage and Tax Statement): Employers use the Form W-2, known as the Wage and Tax Statement, to report the annual wages paid to each of their employees and the specific amount of taxes withheld. This federal form, issued to every employee before the end of January each year, is vital for individuals when preparing their personal income tax returns. For the employee, it offers a clear summary of their earnings and tax withholdings, while for the IRS, it serves as a record of the individual’s employment-related earnings and tax obligations.
  • Form W-3 (Transmittal of Wage and Tax Statements): Form W-3 is basically a document used by employers to submit the total of all W-2 forms to the Social Security Administration. This form summarizes the total earnings, Social Security wages, Medicare wages, and withholding for all employees for the year. The W-3, which must accompany the W-2 forms, is an essential tool for the SSA to verify an employee’s income and tax information.
  • Form 940 (Federal Unemployment Tax Act Return): Form 940 is a federal form that employers utilize to report the annual Federal Unemployment Tax Act (FUTA) tax. This tax provides funds for state unemployment agencies and supports unemployed workers. The form calculates the employer’s federal unemployment tax liability, considering any state unemployment tax they’ve already paid. By accurately completing and submitting this form, employers contribute to a system that offers financial support to individuals during periods of joblessness.
  • Form 941 (Employer’s Quarterly Federal Tax Return): Used by employers, Form 941, titled the Employer’s Quarterly Federal Tax Return, reports the wages they’ve paid and the corresponding taxes withheld every quarter. It captures details related to federal income tax, Social Security, and Medicare withholdings. By submitting this form quarterly, employers maintain a consistent record with the IRS, ensuring they meet tax obligations as required.
  • Form 944 (Employer’s Annual Federal Tax Return): Designed for smaller employers, Form 944 allows them to report income and FICA taxes withheld from employees’ paychecks just once a year instead of quarterly. This form simplifies the reporting process for eligible small businesses by reducing the number of times they must submit tax withholding information, easing the administrative burden and allowing them to focus on running their business.
  • Form 1099 (Miscellaneous Income): The 1099 forms are a series of documents the IRS uses to account for various types of non-employment income. There are many different types of 1099 forms, but one of the most common is the 1099-MISC, which is given to independent contractors or freelancers to report payments made to them for services rendered in the course of trade or business. This form is critical for the IRS to track income that might otherwise go unreported and for contractors to accurately report their income and calculate the taxes.

Federal and Kansas Payroll/Tax Bodies

  • Kansas Department of Revenue: As the principal state-level entity, the Kansas Department of Revenue is responsible for the effective administration of various state taxes, inclusive of income tax withholdings. It is integral in ensuring that all Kansas employers adhere strictly to their state tax obligations. This includes the accurate collection and timely submission of taxes, which is essential for the proper functioning of state-funded programs and services.
  • Kansas Department of Labor: The Kansas Department of Labor plays a pivotal role in the administration of the state’s labor laws. It ensures that employers not only report unemployment taxes accurately but also adhere to the stringent compliance requirements associated with employment security. Furthermore, it enforces adherence to workers’ compensation, thereby safeguarding the interests and well-being of the Kansas workforce.
  • Internal Revenue Service (IRS): The IRS stands as the United States’ primary federal tax authority. Its mandate covers the vast spectrum of federal tax matters, inclusive of payroll taxes. By providing regulatory guidelines, tax codes, and essential resources, the IRS facilitates nationwide tax compliance. It is important to note that both employers and employees rely on the IRS’s directives to understand their federal tax obligations and ensure adherence.
  • U.S. Department of Labor (DOL): Believe it or not, the U.S. DOL has a broad role, impacting various facets of employment across the nation. Among its chief responsibilities are the formulation and enforcement of wage and hour standards. The DOL ensures fair labor practices, safeguards employee rights, and fosters a balanced work environment. This guidance assists employers in aligning their operations with federal employment norms and standards.
  • Social Security Administration (SSA): The Social Security Administration (SSA) runs programs for retirement, disability, survivor benefits, and family support. They also assist people in signing up for Medicare. The SSA is also the government body responsible for issuing Social Security Numbers— crucial for employment, finances, and accessing government services.
  • Wage and Hour Division (WHD): The WHD is a part of the U.S. DOL, whose main job is to ensure employers follow labor standards to protect workers’ rights. The WHD enforces laws like the Fair Labor Standards Act (FLSA), which covers things like minimum wage, overtime pay, recordkeeping, and child labor rules. It also enforces other laws like the Migrant and Seasonal Agricultural Worker Protection Act, Employee Polygraph Protection Act, and the FMLA.

Applicable Taxes in Kansas

Here’s an overview of some of the key state and federal taxes you need to take note of:

State Taxes

  • Kansas State Income Tax: Kansas levies a state income tax on personal earnings. It’s structured with three brackets, charging higher rates as income increases. Employers must withhold this tax from employees’ paychecks based on the amount earned and information provided on W-4 forms. Businesses need to stay updated with bracket changes to withhold accurately. Noncompliance can lead to penalties, making it crucial for payroll accuracy.
  • Kansas State Sales Tax: This tax is a consumption tax imposed on the sale of goods and services. Businesses selling taxable goods or providing taxable services must collect this tax at the point of sale and remit it to the state. The rate can vary as local jurisdictions may add additional taxes. Proper setup of sales tax collection systems is vital for business compliance.
  • Kansas State Unemployment Tax: Employers in Kansas must pay State Unemployment Tax Act (SUTA) taxes, which fund unemployment compensation for displaced workers. This tax is employer-funded and not deducted from employee wages. Rates vary depending on the industry and claim history. New businesses have a standard rate until they establish a claims record. Timely payments are important to avoid interest and penalties on late payments.
  • Kansas Property Tax: Property tax in Kansas is administered locally and is a major source of revenue for counties, cities, and school districts. It is levied on real property (land and buildings) and personal property (vehicles and equipment). Rates vary by location and property type, directly impacting a company’s financial planning. Therefore, property tax compliance is key for businesses, as it can significantly affect the overall tax burden and operating costs.

Federal Taxes

  • Federal Income Tax: Employers are obligated to withhold federal income tax from employees’ paychecks. The amount withheld is determined by the information the employee furnishes on Form W-4 and is calculated according to the IRS-provided tax tables. This tax is progressive, with the applicable rate escalating as the employee’s taxable income increases.
  • Social Security and Medicare Taxes (FICA): Both employers and employees are mandated to contribute to Social Security and Medicare through the Federal Insurance Contributions Act (FICA) tax. Employers are responsible for accurately withholding the specified amount from their employees’ wages and also for contributing a corresponding matching amount.
  • Federal Unemployment Tax Act (FUTA): Employers pay this federal tax separately from other taxes, and it is not withheld from employees’ wages. FUTA, working in conjunction with the state unemployment system, provides critical funds for unemployed workers.

Key Pay Elements That Impact Payroll in Kansas

Minimum Wage

Kansas’ minimum wage is currently set at the federal minimum rate. Employers are required to pay the employees at least this base amount for all hours worked. The state minimum wage serves as a fundamental wage floor, aiming to protect workers from unduly low pay and exploitation. It’s a critical element in payroll calculations, ensuring that wages meet or exceed federal and state standards for fair labor compensation and contribute to economic stability.

Overtime

In Kansas, overtime pay is mandated for any hours worked beyond 40 in a single workweek. The compensation rate for these additional hours is one and a half times the employee’s regular hourly wage. Employers must meticulously track work hours to comply with these regulations, as overtime pay can significantly impact payroll budgeting and employee income, thereby ensuring workers are fairly and fully compensated for extended work periods.

Pay Stub Laws

Kansas mandates that employers provide a detailed pay stub each paycheck, which must show gross and net earnings and itemize all deductions comprehensively. These deductions can include federal and state taxes, Social Security, Medicare, and any other lawful withholdings. Pay stubs are vital for employees to fully understand their compensation, accurately track their earnings over time, and verify the correctness of payroll calculations and deductions made.

Workers’ Compensation Insurance

Employers in Kansas are legally required to carry Workers’ Compensation Insurance, providing benefits to employees who suffer job-related injuries or illnesses. The cost of this insurance is a significant factor in overall payroll expenses. Workers’ compensation guarantees that employees receive crucial financial protection during recovery periods, and simultaneously, employers are shielded from direct financial liability for workplace injuries or occupational diseases.

Wage Garnishments

When employees have legally enforceable debts, employers in Kansas may be required to withhold a portion of wages as garnishments. Payroll must process these deductions in accordance with legal orders, which may include child support, alimony, tax levies, or other debts. These garnishments affect the net income of employees and require careful administration to ensure legal compliance and protection of employee rights.

Final Paycheck

Kansas law requires that the final paycheck be issued to departing employees by the next regular payday. This paycheck must encompass all earned wages and applicable accrued benefits such as unused vacation time. For employers, this requires a prompt and precise finalization of the employee’s payroll account, assuring that all compensatory aspects of the individual’s employment are conclusively settled in full accordance with the state’s labor regulations.

Step-by-Step Guide to Payroll in Kansas

Below is a step-by-step guide for running payroll in Kansas that you can follow to get started.

  • Step 1: Employer Registration: Before processing payroll, employers must register with the Kansas Department of Revenue for an employer withholding tax account and with the Kansas Department of Labor for unemployment taxes. Registration can be completed online, providing a streamlined process. This step is critical as it aligns the business with state tax collection and unemployment insurance systems, laying the groundwork for compliant payroll operations.
  • Step 2: Employee Documentation: Employers must collect proper documentation, including the federal W-4 and I-9 forms and the state-specific K-4 form. Accurate completion of these forms ensures correct tax withholding and compliance with employment eligibility verification. This foundational step is imperative for maintaining proper tax records and confirming that all employees are authorized to work in the United States and Kansas.
  • Step 3: Determine Payroll Schedule: Kansas employers must establish a consistent payroll schedule, be it weekly, bi-weekly, semi-monthly, or monthly. This frequency should align with the state’s pay period requirements and the business’s operational needs. Deciding on a payroll schedule provides predictability for employees and helps employers maintain consistent and timely payroll practices, which are essential for financial planning and legal compliance.
  • Step 4: Calculate Gross Pay: For each pay period, calculate the employee’s gross pay based on the hourly wage or salary. Include any additional compensation such as overtime, bonuses, commissions, or allowances. Accurate gross pay calculation is essential as it directly affects tax withholding and the employee’s net pay. It is the initial and critical step in ensuring employees are compensated fairly for their labor and forms the basis for all subsequent payroll calculations.
  • Step 5: Withhold Taxes and Deductions: After calculating the gross pay, subtract federal and state taxes, along with other deductions such as retirement contributions or insurance premiums, from the employee’s gross pay. Precise withholding is essential for compliance with tax laws and to ensure correct net pay. Employers must keep abreast of current tax rates and deduction requirements, as errors can lead to penalties for both the employer and the employee.
  • Step 6: Net Pay and Paychecks: After necessary deductions, the remaining amount is the employee’s net pay. Kansas employers should issue paychecks or direct deposits on the determined pay date, providing pay stubs with detailed information about the pay period earnings and deductions. Ensuring employees receive their net pay promptly reflects the employer’s commitment to their workforce and adherence to Kansas labor laws.
  • Step 7: Record Keeping and Reporting: In Kansas, employers must maintain detailed payroll records for each employee and submit payroll reports to state and federal agencies. Kansas requires quarterly wage reporting and unemployment tax filings. The Internal Revenue Service (IRS) mandates annual W-2 reporting for employees and Form 940 and 941 for unemployment and federal withholdings, respectively. Rigorous record-keeping and punctual reporting are indispensable for audit preparedness and regulatory compliance.
  • Step 8: Year-End Reconciliation: At the end of the fiscal year, employers must reconcile payroll records, ensuring all tax payments and filings accurately match the payroll records. This includes verifying state and federal tax deposits, carefully reviewing year-end tax forms, and promptly sending W-2 forms to employees. Proper year-end reconciliation is vital to certify that all payroll activities for the year are accurately reported, documented, and comply with tax laws.

Final Thoughts

Managing payroll in Kansas can be a particularly challenging task. Employees must ensure they diligently adhere to Kansas’s strict payroll regulations. To simplify the often complex process of managing payroll, consider exploring our comprehensive list of the top 6 applications tailored to streamline payroll responsibilities in the United States. If you’ve already established a payroll system, we’ve provided ten tips to enhance your payroll procedure within the United States.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.

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