How did Kansas change individual income tax rates and withholding for 2017 and 2018?

Plain-English summary

Kansas Notice 17-02 explains the individual income tax rate increases enacted by the 2017 Legislature in Senate Bill 30, which amended K.S.A. 79-32,110. The changes took effect July 1, 2017.

The rates. Rates rose retroactively for tax year 2017 and rose again for 2018 and later years, across a restored three-bracket schedule:

• Tax year 2017 (married filing joint): 2.9% up to $30,000; $870 + 4.9% over $30,000; $2,340 + 5.2% over $60,000. All others / estates / trusts: brackets at $15,000 and $30,000.
• Tax year 2018 and after (married filing joint): 3.1% up to $30,000; $930 + 5.25% over $30,000; $2,505 + 5.7% over $60,000. All others / estates / trusts: brackets at $15,000 and $30,000.

Withholding. Because 2017 rates changed mid-year (and change again on January 1, 2018), the Department updated its withholding tax tables to the higher 2018 rates so most employees can "catch up" on 2017 withholding without another mid-year change.

No underpayment penalty for the rate change. The Bill adds subsection (f) to K.S.A. 79-32,110: no penalty or interest is assessed for underpayment caused by the rate increase, so long as it is paid by April 17, 2018 (the due date of 2017 returns).

Corporate tax unchanged. Senate Bill 30 does not affect corporate income tax rates.

What this means for you

Individuals, estates, and trusts

• Your 2017 Kansas tax is figured at the higher retroactive 2017 rates (2.9% / 4.9% / 5.2%), and 2018+ at 3.1% / 5.25% / 5.7%.
• If the mid-year increase left you underpaid, pay the shortfall by April 17, 2018 to avoid penalty and interest.

Employers and payroll

• Use the Department's updated 2018-rate withholding tables for the second half of 2017 and going forward.

Corporations

• Your income tax rates are unchanged by Senate Bill 30.

Common questions

What are the new individual rates? 2.9% / 4.9% / 5.2% for 2017, and 3.1% / 5.25% / 5.7% for 2018 and after.

Are the 2017 rates retroactive? Yes -- they apply to all of tax year 2017.

Will I owe a penalty for under-withholding? Not for underpayment caused by the rate change, if you pay it by April 17, 2018.

Did corporate rates change? No.

Citations and references

• Senate Bill 30 (2017) -- amended K.S.A. 79-32,110 to raise individual income tax rates for 2017 and 2018+ and to add subsection (f).
• Subsection (f) -- no penalty/interest for rate-change underpayment paid by April 17, 2018.
• Corporate income tax rates not affected.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 17-02

Original ruling text

Tax Policy Group Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Samuel M. Williams, Secretary Department of Revenue Sam Brownback, Governor

                                     NOTICE 17-02

                INCOME TAX RATES AND WITHHOLDING RATES CHANGED
                       FOR INDIVIDUALS, ESTATES, AND TRUSTS
                                   (JULY 1, 2017)

The 2017 Legislature increased individual income tax rates retroactively for tax year 2017, and
further increased them for tax year 2018 and later years. The changes were made in Senate Bill
30, amending K.S.A. 79-32,110, the statute which establishes the rates of state income tax. The
changes are in effect beginning July 1, 2017.

Kansas income tax rates for tax year 2017 and later years are as follows:

                              Married Filing Joint Returns

  For tax year 2017:

If the taxable income is: The tax is:
Not over $30,000 2.9% of Kansas taxable income
Over $30,000 but not over $60,000 $870 plus 4.9% of excess over $30,000
Over $60,000 $2,340 plus 5.2% of excess over $60,000

  For tax year 2018, and all tax years thereafter:

If the taxable income is: The tax is:
Not over $30,000 3.1% of Kansas taxable income
Over $30,000 but not over $60,000 $930 plus 5.25% of excess over $30,000
Over $60,000 $2,505 plus 5.7% of excess over $60,000

                                 All Other Individuals
                             (As Well As Estates and Trusts)

  For tax year 2017:

If the taxable income is: The tax is:
Not over $15,000 2.9% of Kansas taxable income
Over $15,000 but not over $30,000 $435 plus 4.9% of excess over $15,000
Over $30,000 $1,170 plus 5.2% of excess over $30,000

  For tax year 2018, and all tax years thereafter:

If the taxable income is: The tax is:
Not over $15,000 3.1% of Kansas taxable income
Over $15,000 but not over $30,000 $465 plus 5.25% of excess over $15,000
Over $30,000 $1,252.50 plus 5.7% of excess over $30,000

                                 Withholding Tax Changes

Under Kansas law the Secretary of Revenue is required to prepare tables, and/or to prescribe
schedules or rates, for withholding tax that will approximate an employee's annual tax liability
during a calendar year. Under the provisions of the new legislation this task is complicated by the
fact the income tax rates for tax year 2017 are changing in mid-year, meaning many employees
will not have had enough tax withheld for the year. In addition, tax rates will change again in only
6 months because different rates become effective January 1, 2018, for tax year 2018.

To address these concerns the Department has updated the withholding tax tables to reflect the
higher 2018 tax year withholding tax rates. These tables are available through the Department's
website at: https://ksrevenue.org/forms-btwh.html Applying these rates to the second half of tax
year 2017 should allow most employees to "catch-up" on their withholding for tax year 2017. In
addition, beginning to withhold at the 2018 rate now means it will not be necessary to change the
amount of withholding again in just 6 months.

While using the 2018 withholding rate tables will make the necessary adjustments to most wage
earners withholding, every taxpayer is different. As a result, the Department encourages all wage
earners to review their personal tax situation, and to discuss any questions with their tax preparer
or tax professional.

              No Penalty For Underpayment of Tax Due To Rate Change

Like the federal tax system, the Kansas tax system is designed so that income tax is remitted as
income is earned. Usually, under withholding of income tax or failure to make estimated tax
payments will result in a penalty being imposed. However, this legislation specifically provides
that a penalty will not be imposed if all of the tax that was underpaid as a result of the rate increase
is paid by April 17, 2018, which is the due date of 2017 calendar year income tax returns. Section
4 of the Bill amends K.S.A. 79-32,110 by adding subsection (f) which states:

       (f) No taxpayer shall be assessed penalties and interest arising from the
 underpayment of taxes due to changes to the rates in subsection (a) that became law on
 July 1, 2017, so long as such underpayment is rectified on or before April 17, 2018.

                       Corporate Income Tax Rates Not Affected

The changes made by Senate Bill 30 do not affect corporate income tax. Corporate income tax
rates have not changed.

                               Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                           Taxpayer Assistance Center
                          Kansas Department of Revenue
                            Topeka, KS 66612-1588
                              Phone: 785-368-8222
                               Fax: 785-291-3614