Remote workers: Expect to wait months for your Kansas City earnings tax refund
If you were counting on a Kansas City earnings tax refund, it’s going to be a long wait.
Even if you filed today for a refund of the 1% withheld from your paycheck while you were working at home outside the city limits last year, it might be October before a check arrives in the mail.
Six months. That’s two to three times as long as it usually takes for employees of Kansas City-based companies who regularly travel out of town or are based off site to get a refund of taxes paid for days they were not physically in the city, officials say.
But because so many nonresidents have been working remotely rather than commuting to their workplaces in Kansas City during the pandemic, the city’s revenue department is inundated with requests from people who are for the first time seeking an E-tax refund.
“In the past a typical refund request would be processed in 8-12 weeks after being submitted,” a senior auditor wrote on Tuesday. “Currently we are experiencing a much higher number of refund requests so the estimated wait time has been increased to up to six months.”
Which means if you filed for a refund back in February, that check might not arrive until the back-to-school sales have come and gone and this year’s state and federal refund checks are a distant memory.
Other than retirees, everyone who lives or works in Kansas City is obligated to pay 1% of their income to the city. Nonresidents pay because, nearly 60 years ago, Kansas City voters decided that people who work in the city but live elsewhere have an obligation to cover some of the costs of the police, fire and other municipal services they benefit from when working within the city limits.
By that rationale, employees who work away from their Kansas City-based office for any length of time are entitled to a refund, so the city has long reimbursed those taxpayers for that percentage of the year they worked out of town.
With federal, state and Kansas City’s tax deadlines extended until May 17, it’s hard to know now how many people who qualify for a refund will actually apply for one using the forms available on the city’s website.
But enough have filed already — more than 11,500, 31% more than all of last year with more than six weeks to go until the deadline — that the system for processing those RD-109NR forms is swamped.
“The sheer volume of refunds is slowing the process,” city spokesman Chris Hernandez said in a written response to The Star’s questions. “We have had a hiring freeze in place since last summer, so that budget constraint has limited our staff size with normal attrition. Additionally, we have a lot of first-time filers, which is making the error rate on returns higher than normal. That increases the time it takes to process the refund as we work with tax filers to correct those mistakes.”
In addition to filling out a special form, taxpayers requesting a refund must provide contact information for someone at their workplace who can confirm that they were working off-site during the period claimed. That verification can slow the process, especially if the information was incorrect or left out.
The coronavirus put a big dent in the city’s finances. The earnings tax, which is the city’s largest single source of revenue, was expected to bring in $23 million less than the $292 million budgeted. Some of that decline was due to layoffs at businesses affected by the economic downturn.
Projected refunds account for the rest. Some $17 million was set aside to reimburse Kansas City-based employees for taxes withheld last year while they worked remotely from across the state line or beyond the city limit limits in Missouri. The city paid out $4.9 million to 8,791 taxpayers for 2019.
Mayor Quinton Lucas was not in favor of sending them checks at a time when the city’s finances were suffering from the effects of the pandemic. In late December, he told The Star’s editorial board that the city was within its legal rights to refuse to refund earnings taxes paid by suburban workers who worked outside the city limits in 2020. Nonresidents pay about half of the earnings taxes collected in any given year.
“I’m clearly in the camp that I don’t think Kansas City should ... refund it,” Lucas said at the time. “I’m of the view that it is a lawful approach for us.
”Do I have the City Council votes to do such a thing? I don’t know.”
It’s unclear how seriously he pursued that course. At the time he made the statement, Hernandez told the editorial board that city staff was studying the idea.
St. Louis did decide to suspend refunds to nonresidents working from home. It is now defending itself against a federal lawsuit filed Monday in which the plaintiffs are asking the court to compel the city to issue refunds to all who qualify for them.
Lucas was in meetings Wednesday and did not immediately respond to a request for comment on why he backed down.
Hernandez did not answer the question directly when asked if the potential for court challenges might have influenced the decision.
“The City’s Code of Ordinance and Regulations governing earnings tax refunds has not been changed,” he wrote. “Therefore, refunds are being issued, if sufficient documentation is provided by the taxpayer, following the usual procedure.”
You just might have to wait a long time to get it.
This story was originally published April 1, 2021 at 5:00 AM.
