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Navigating Payroll in Kansas: A Guide for Small Businesses

Managing payroll can be a complex task for small business owners, especially with varying state and federal regulations. This guide provides an overview of essential payroll considerations for businesses operating in Kansas, helping you stay compliant and ensure your employees are paid accurately and on time.

Federal Payroll Requirements

Before diving into Kansas-specific rules, all U.S. employers must comply with federal payroll laws. Key obligations include:

Obtain an Employer Identification Number (EIN)

You'll need an EIN from the IRS to report taxes and other documents. If you don't have one, you can apply online via the IRS website.

Employee Forms

• Form W-4: Each employee must complete a Form W-4 (Employee's Withholding Certificate) so you can withhold the correct amount of federal income tax.
• Form I-9: You must verify an employee's eligibility to work in the United States using Form I-9 (Employment Eligibility Verification).

Federal Income Tax Withholding

Based on the W-4, you'll withhold federal income tax from employee wages. The IRS provides Publication 15-T with methods for determining withholding.

FICA Taxes (Social Security and Medicare)

Employers must withhold Social Security and Medicare taxes from employees' wages and also pay a matching employer portion.

Tax Type	Employee Rate (2024-2025)	Employer Rate (2024-2025)	Wage Base Limit (2024 Social Security)
Social Security	6.2%	6.2%	$168,600 (for 2024, subject to change annually)
Medicare	1.45%	1.45%	No limit
Additional Medicare Tax	0.9% (on wages over $200,000 for single filers)	N/A	Applies to employee wages exceeding $200,000

Federal Unemployment Tax Act (FUTA)

Employers pay FUTA tax, which helps fund state workforce agencies. The FUTA tax rate is 6.0% on the first $7,000 of each employee's wages. However, most employers receive a credit of up to 5.4% if they pay state unemployment taxes on time, making the effective FUTA rate often 0.6%.

Kansas State Payroll Requirements

In addition to federal laws, Kansas has its own set of payroll rules:

Kansas Income Tax Withholding

Employers in Kansas must withhold state income tax from employees' wages if they are subject to federal withholding. Employees should complete Form K-4 (Kansas Employee's Withholding Allowance Certificate). Withholding tables and instructions are available from the Kansas Department of Revenue (KDOR).

You must register with KDOR for a withholding tax account number. Deposits are typically made semi-weekly, monthly, or quarterly, depending on the amount of tax withheld.

Kansas Unemployment Insurance Tax (SUTA)

Kansas employers are required to pay State Unemployment Tax Act (SUTA) contributions. New employers generally start at a specific rate (e.g., 2.7% for non-construction, 6.0% for construction on a portion of each employee's wages). This rate can change annually based on your business's experience rating. The wage base for Kansas SUTA is $14,000 per employee per year (this can change, so always verify). Register with the Kansas Department of Labor (KDOL).

New Hire Reporting

Employers in Kansas must report all new hires and rehires to the Kansas New Hire Directory within 20 days of their start date. This helps enforce child support orders.

Minimum Wage and Overtime

Kansas adheres to the federal minimum wage and overtime standards established by the Fair Labor Standards Act (FLSA).

Requirement	Rate/Rule (as of May 2025)
Kansas Minimum Wage	$7.25 per hour (same as federal)
Tipped Employee Minimum Wage	$2.13 per hour (if tips bring total to at least $7.25/hour)
Overtime	1.5 times regular rate for hours worked over 40 in a workweek for non-exempt employees.

Pay Frequency and Pay Stubs

Kansas law requires employers to pay employees at least once per month on regular paydays designated in advance. If an employer does not designate paydays, then paydays are the first and fifteenth of the month. Upon separation, final pay is due by the next regular payday. Kansas requires employers to furnish a pay stub with specific information with each payment of wages.

Workers' Compensation Insurance

Most Kansas employers are required to carry workers' compensation insurance to cover medical expenses and lost wages for employees injured on the job. There are few exceptions, such as for employers with an annual gross payroll of $20,000 or less. Check with the Kansas Department of Labor, Division of Workers Compensation for specific requirements.

Step-by-Step Payroll Process in Kansas

1. Set Up Your Business: Obtain EIN, register with KDOR and KDOL.
2. Collect Employee Paperwork: IRS Form W-4, Kansas Form K-4, Form I-9.
3. Choose a Pay Period: Weekly, bi-weekly, semi-monthly, or monthly.
4. Calculate Gross Pay: Hours worked multiplied by pay rate, plus any overtime, bonuses, or commissions.
5. Calculate Deductions: Federal income tax, state income tax, FICA taxes, and any voluntary deductions (health insurance, retirement contributions, etc.).
6. Determine Net Pay: Gross pay minus total deductions.
7. Pay Employees: Issue paychecks or direct deposits, along with detailed pay stubs.
8. Remit Taxes: Deposit withheld federal and state taxes by their respective deadlines. Pay employer FICA and FUTA taxes. Pay SUTA contributions.
9. File Payroll Reports:
   • Federal: Form 941 (quarterly), Form 940 (annually), Form W-2 (annually).
   • Kansas: KW-5 (Withholding Tax Deposit Report - frequency varies), K-CNS 100 (Unemployment Wage Report & Tax Return - quarterly), KW-3 (Annual Withholding Reconciliation).
10. Maintain Records: Keep accurate payroll records for at least three years (Kansas requirement) or four years (federal recommendation for tax purposes).

Common Payroll Mistakes to Avoid

• Misclassifying Employees as Independent Contractors: This can lead to significant penalties.
• Incorrect Overtime Calculations: Ensure you correctly identify non-exempt employees and pay overtime.
• Late or Incorrect Tax Filings/Payments: Penalties and interest can accrue quickly.
• Not Keeping Accurate Records: Essential for compliance and audits.
• Failing to Stay Updated: Tax laws and rates change; ensure you're using current information.

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