Still working remote? Kansas City just made it easier to get your earnings tax refund
Kansas City has reversed its year-old policy that made it more difficult for non-resident remote workers to get refunds of city earnings taxes.
The city council on Thursday approved an ordinance simplifying the refund rules after council members and the city’s revenue department were besieged with complaints. Taxpayers will likely receive millions of dollars back they might not otherwise have received, and the city’s bank account will be that much lighter.
It means people who live outside the city limits will no longer have to file multiple court challenges to get refunds of the earnings taxes taken out of their pay while performing work outside the city limits. That requirement was put in place last March as a way to quell the surge in refund requests that began when suburbanites abandoned their Kansas City workplaces and worked from home during the pandemic.
Councilwoman Andrea Bough and Mayor Quinton Lucas proposed reversing that policy. The measure passed unanimously 13-0.
Bough last month called the court-challenge process “unfair” and “ridiculous.” Previously, refund requests only required filing a single form once a year at income tax time.
Councilwoman Heather Hall welcomed the change, calling the city’s tougher refund policy “disrespectful” to taxpayers.
The city’s finance department also concluded that the court challenges placed a “pretty heavy administrative burden” on its staff, finance director Tammy Queen told a council committee on Wednesday.
Kansas City residents must pay the 1 percent earnings tax no matter where they work. Non-residents pay if they work inside city limits, the idea being that they should share in the cost of the city services they use.
But the city has in the past routinely refunded about $4 million each year to remote workers whose place of employment has a Kansas City address, but who work at home or travel a lot. That grew to nearly $17 million after the arrival of COVID-19 in 2020 and workplaces shut down. The city refunded $16 million last year on 2021 tax collections, Queen told a city the council committee Wednesday.
So far this year, less than $2 million in refunds have been requested, she said. But Queen expects that amount will increase once word gets out about the more liberal procedures adopted Thursday. To get a refund, taxpayers now will only need to fill out a form and provide documentation to substantiate how much of the year they worked outside of the city.
Still, with many more workers now returning to the office, she doesn’t expect this year’s level of refunds to approach the levels seen during the height of the pandemic.
The city earlier set aside $8.5 million for refunds this year and the proposed budget for next fiscal year sets aside $6.25 million, but that might have to be increased depending on how this year pans out.
