February 2, 2021
Kansas provides relief from state income tax withholding shortages in connection with COVID-19
On January 27, 2021, Kansas Governor Laura Kelly announced that in consideration of the COVID-19 emergency, an executive order has been issued that effectively relieves certain employers of the liability for state income tax withholding shortages in 2020.
Specifically, Executive Order #21-01 provides that for the period March 13, 2020, through December 31, 2020, employers have the option to withhold Kansas state income tax based on the state of the employee's primary work location rather than the state in which the employee was temporarily teleworking due to COVID-19. The result of this this executive order is that employers that applied this methodology in computing 2020 Kansas income tax withholding are not liable for withholding shortages that may have arisen.
Effective on and after January 1, 2021, employers are required to withhold Kansas state income tax from all wages paid to residents and from wages paid to nonresidents working within the state according to the requirements in K.S.A. 79-3296. (See also KW-110.)
In December 2020, the Kansas Department of Revenue stated in its frequently asked questions (FAQs) about income tax withholding that, in consideration of the impact of the COVID-19 emergency on employer operations, it would waive employer under withholding and individual estimated tax payment penalties for all employees required to work remotely. These penalty waivers apply for the period in 2020 that Governor Laura Kelly's disaster emergency order remained in effect. (See EY Tax Alert 2020-2827.)
Ernst & Young LLP insights
Earlier this month, the Missouri Department of Revenue similarly adopted provisions under 12 CSR 10-2.109 that give certain employers relief from 2020 state income tax withholding shortages. Unlike the Kansas relief, qualifying Missouri employers are required to submit Form 5841, Affidavit for Withholding Based on Primary Work Location, to qualify for the relief.
For more information concerning the proposed regulations, see EY Tax Alert 2021-0124.
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