It’s still refund season for some Kansas residents
After Supreme Court decision, Kansans who paid 1 percent Kansas City earnings tax could collect refunds
H&R Block (NYSE: HRB), the world’s largest consumer tax services provider, estimates more than 100,000 Kansans may collect up to a total of $72 million in tax refunds following the state’s reevaluation of treatment of the Kansas City Earnings Tax (KCET). The recent Supreme Court decision in Comptroller of the Treasury of Maryland v. Wynne and Kansas’ reevaluation of state tax laws means taxpayers who live in Kansas and work in Kansas City, Missouri, may be due a refund from Kansas going back to 2012 to account for the KCET.
Kansas City imposes a 1 percent tax on all income earned in the city, including on non-residents who work in Kansas City. Previously, Kansas residents filing a state of Kansas return received a credit against their Kansas tax liability for taxes paid to the state of Missouri, but not for the earnings tax paid to Kansas City. Impacted taxpayers may amend returns from 2012, 2013 and 2014. However, after 2012, it is likely the Missouri state tax alone will give the taxpayer the maximum possible credit and no additional credit will be due. The tax credit cannot exceed the Kansas state tax liability.
For example, a Kansas resident who earned $50,000 in Kansas City, Missouri, in 2012 and had tax liabilities of $2,200 in Missouri, $2,500 in Kansas and $500 in Kansas City would have received a credit of only $2,200 to offset his Kansas tax when he filed his original tax return. Now that Kansas will take the KCET into account, this taxpayer could file an amended Kansas return. Although the Missouri and Kansas City tax adds up to $2,700, taxpayers cannot get a larger credit than their Kansas tax liability. This taxpayer would therefore get an additional $300 credit and refund from Kansas.
“This change could mean hundreds of dollars in refunds for affected taxpayers, especially for the 2012 return. It could be well worth the effort of pulling out those old tax files and completing the seven-step worksheet,” said Kathy Pickering, executive director of The Tax Institute at H&R Block. “Tax professionals at our 90 area H&R Block offices are also available to help taxpayers navigate this process and get their money back.”
H&R Block will prepare and file clients’ amendments for a minimal charge. New clients can also take advantage of H&R Block’s free Second Look review. This review is designed to ensure taxpayers received the maximum refund possible and to help them recover any hard-earned money that might have been left on the table.
The deadline to file a 2012 amendment and claim a refund is the later of three years from the date the return was filed or two years from the date the tax was paid. Most taxpayers will have until April 2016 for 2012 returns. Taxpayers will have until April 2017 for 2013 returns.
Before filing an amended return, taxpayers will first need to determine if they are eligible for a refund. They will need to:
- complete a worksheet in the K-40 tax return instructions,
- refigure their credit for taxes paid to another state (now including Kansas City) and
- compare the refigured credit to their original credit.
If the new credit is larger, the taxpayer should file an amended return to get the difference refunded. Taxpayers should include the worksheet, a copy of their Missouri return, a copy of the Kansas City RD-109 and a copy of their W-2 with their amended Kansas return.
Taxpayers can make an appointment with an H&R Block tax professional to amend and file any returns that result in an added refund. To schedule an appointment, taxpayers should visit www.hrblock.com or call 1-800-HRBLOCK.
About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world’s largest consumer tax services provider. More than 680 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2015, H&R Block had annual revenues of nearly $3.1 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products. H&R Block also offers adjacent Tax Plus products and services. For more information, visit the H&R Block Newsroom at https://www.hrblock.com/tax-center/newsroom.
Tax refunds for H&R Block clients were up 1.4% under the first year of tax reform and the new withholding tables, while overall tax liability was down 5.6%.
Were you surprised by a lower tax refund last year? Learn how to navigate any tax reform impact with tax planning strategies from the experts at H&R Block.