Taxes in Kansas will be climbing over the weekend because a tax increase approved by lawmakers is taking effect. The new law will raise income tax rates and reinstate income taxes for thousands of business owners.
Lawmakers approved a $1.2 billion income tax increase to help close a projected $900 million budget gap for the next two fiscal years and add funding for schools. They did that by rolling back many of the 2012 tax cuts.
“We’re encouraging everybody to just think about it,” said Kansas Revenue Secretary Sam Williams.
For wage-earning employees, Williams recommends studying paychecks in July to make sure the income tax withholding has been increased.
Under current law, there are two income tax brackets with rates of 2.7 and 4.6 percent. The new law creates a third bracket, and includes rates of 2.9, 4.9 and 5.2 percent.
Income tax rates will rise again in 2018.
The tax law also eliminates an income tax exemption for more than 300,000 businesses owners. That will mean many businesses will have to start making quarterly tax payments.
“Businesses that were created in that time, they haven’t been in the habit of making any estimated tax payments,” said Williams.
Andy Phillips, with The Tax Institute at H&R Block, said businesses that have already been making estimated payments should check to see if they need to be updated.
“Visit with your tax advisor, even on your own do an online tax calculator. Determine what this means to you,” said Phillips.
The tax changes are retroactive back to the beginning of 2017. Phillips warns that if workers or business owners don’t make changes, they could face a larger-than-expected tax bill.
“It’s extremely important to have that mid-year checkup and determine if you need to take some proactive steps and not have a surprise waiting for you,” said Phillips.
There will be no late penalties or interest as long as all taxes due are paid by April of 2018.
The new tax law will also reinstate some tax deductions and credits, but those won’t begin phasing back in until next year.