Can Kansas employers round income tax withholding to the nearest dollar?

Plain-English summary

An employer's payroll office asked about the word "may" in the Kansas withholding guidance: because the Kansas Withholding Tax Booklet says withholding computed by the percentage method "may be" rounded, does that mean rounding is optional? The Department's answer: yes.

Employers who calculate Kansas income tax withholding using the percentage method may round each amount withheld and remitted to the nearest whole dollar. The rule: drop amounts under 50 cents, and round amounts from 50 to 99 cents up to the next dollar — so $2.49 becomes $2.00 and $2.50 becomes $3.00. This is stated in the Kansas Withholding Tax Booklet (Rev. 10-15), page 6.

What this means for you

Employers and payroll departments

If you use the percentage method, you have the option — not the obligation — to round Kansas withholding to whole dollars. Apply the standard rounding convention (under 50¢ down, 50–99¢ up) consistently.

Payroll software and bookkeepers

Both rounded and unrounded percentage-method withholding are acceptable to the Department. Choose the approach your system supports and use it uniformly.

Common questions

Q: Is an employer required to round Kansas withholding?
A: No. Rounding is optional for withholding computed under the percentage method.

Q: How does the rounding work?
A: Round to the nearest whole dollar — amounts under 50 cents go down, and amounts from 50 to 99 cents go up (e.g., $2.49 → $2.00, $2.50 → $3.00).

Q: Where does this rule come from?
A: The Kansas Withholding Tax Booklet (Rev. 10-15), page 6, which states that percentage-method withholding "may be rounded."

Q: Does this ruling apply to me?
A: A Kansas private letter ruling addresses only the requesting taxpayer and cannot be relied on as precedent by others, though it shows the Department's position; check the current withholding booklet for today's guidance.

Citations and references

• Kansas Withholding Tax Booklet (Rev. 10-15), page 6 — "Kansas withholding computed using the percentage method may be rounded. Round to the nearest whole dollar by dropping amounts under 50 cents and increasing amounts from 50 to 99 cents to the next higher dollar."

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2016-005

Original ruling text

Private Letter Ruling

Body:

August 15, 2016

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Re: Kansas Income Tax

Dear XXXXX

Your correspondence of August 5, 2016, has been referred to me for response. Thank you for your inquiry.

By your e-mail you have requested our advice regarding Kansas income tax. Specifically, your e-mail states:

Our offices had a question come to us on rounding the State of Kansas withholdings. Per the Guide to Kansas Withholding Tax:

“Kansas withholding computed using the percentage method May be rounded. . .” The question that arose was, since the withholding guide uses the phrase “may be” does this mean that employers have the option of rounding KS withholding taxes? Thanks for any help you can give.

In response to your inquiry, please be advised the answer to your question is “yes”. Employers who are using the percentage method to calculate the amount of tax to be withheld and remitted on behalf of their employees may round the amount to be withheld and remitted to the nearest whole dollar. As you seem to know, the Kansas Withholding Tax Booklet (Rev 10-15) states, on page 6:

Rounding. Kansas withholding computed using the percentage method may be rounded. Round to the nearest whole dollar by dropping amounts under 50 cents and increasing amounts from 50 to 99 cents to the next higher dollar. For example, $2.49 becomes $2.00 and $2.50 becomes $3.00.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

JW:jw

NOTE: This opinion letter is based solely on the facts provided in your request for advice. If material facts or information were not disclosed this letter is null and void. This letter will be revoked without further action by the Department if the statutes, administrative regulations, published revenue rulings, or court decisions that materially affect this opinion are changed.

Date Composed: 09/16/2016 Date Modified: 09/16/2016

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