Payroll tax in Missouri: What employers need to know [2024]

No matter what industry you operate in, one of your recurring responsibilities as a business is settling taxes. If you run a company in the US, you’re responsible for staying compliant with federal, state, and, often, local tax laws, all of which impact your formal and financial obligations as an employer.

Like many states, Missouri’s tax system is a progressive one, meaning the more employees earn, the higher the contributions they must pay. On top of state income tax, you must also settle unemployment insurance taxes. If you or your employees operate in Kansas City or St. Louis, you might also need to remit local taxes. Sounds overwhelming? This article serves as an overview of employer tax obligations in Missouri and how you can simplify running payroll in the state.

The 3 Missouri payroll taxes

On top of federal-level taxes like federal income obligations and FICA (social security tax and Medicare tax), there are three types of state-specific payroll taxes in Missouri. State-level obligations are administered by the Department of Revenue, while local taxes for Kansas City and St. Louis are paid to the cities’ respective tax authorities.

Employer Withholding Tax (Missouri income tax)

The Missouri Department of Revenue requires employers to withhold and pay Missouri State Income Tax from their employees’ paychecks. This tax applies to:

• Missouri residents who also work in Missouri
• Missouri residents earning a wage in a state that has a 0% income tax rate
• Missouri residents working in a state where the income tax rate is lower than the Missouri State Income Tax rate
• Non-residents earning a wage in Missouri—the state doesn’t observe any reciprocity agreements

Companies do not have to withhold taxes for Missouri non-residents who are paid through an office in Missouri but who do not work in the state.

Missouri follows a progressive tax rate formula, with the amount of tax relative to employee paychecks. The tax rates range from 2% to 4.8%. Under Senate Bills 3 and 5, passed in late 2022, the state income tax rates will be further reduced in the next few years if Missouri hits income goals.

As of January 2023, the first $1,000 in earnings is free of tax.

The state encourages employers (who are not government agencies) to settle their withholding tax returns on time by offering a timely compensation deduction (ranging from 0.5% to 2% of the compensation amount).

On the other hand, companies that fail to have their tax return declarations and payments postmarked before the tax filing due date risk state-mandated penalties and interest. 

To help with calculations, the Missouri Department of Revenue offers a withholding tax calculator on its website (though you can also use the withholding tables in the Department of Revenue’s State of Missouri Employer’s Tax Guide, though that requires doing more manual calculations). It also features an “Additions to Tax and Interest” calculator for those who are late fulfilling their income tax withholding obligations.

Employers are seen as “personally liable” for any income tax they withhold for their staff. That said, employees don’t have the right to take action against employers who incorrectly deduct income tax from their wages. As long as they’re paid to the Department of Revenue, Missouri tax authorities will deem the payment as done in “good faith”.

Local taxes

There are two local jurisdictions (Kansas City and St. Louis) that require employers to withhold an additional local income tax on top of state- and federal-level obligations. These are often referred to as e-tax, short for “earnings tax.”

In Kansas City:

Companies must register and settle taxes to the Revenue Division of the City of Kansas City, Missouri

The withholding tax rate in Kansas City is 1% of the employee’s income–not only their standard salaries or wages, but also tips, commissions, bonuses, and others. These funds are used to cover a variety of public services within the city.

In St. Louis:

Companies must register and settle taxes to the Earnings of Tax Department of the City of St. Louis Collector of Revenue.

The tax obligation in St. Louis is also 1%. Employers must withhold taxes for:

• Employees who either work or live within the city boundaries (even if the employer is based outside of St.Louis)
• All employees, if the employer is registered in St. Louis (regardless of where their staff are based)

St. Louis also has a separate Payroll Expense tax which is paid by the employer. As specified on the city’s Earnings Tax Department website, the tax equals 0.5% of the “wages earned in the City of St. Louis.”

There are a few organizations that are exempt from the Payroll Expense tax. These are:

• Not-for-profit institutions (including hospitals and educational organizations)
• State departments and agencies 
• Federal agencies and departments
• Charitable and religious institutions
• Social service and fraternal organizations

Unemployment tax

Another payroll tax that employers are subject to is The State Unemployment Tax Act (SUTA), also known as State Unemployment Insurance (SUI). All employers who have at least one employee working 20 weeks or more annually are required to pay SUTA. It acts as a temporary financial support for people who are unemployed, on top of the Federal Unemployment Tax Act (FUTA). Just like FUTA, SUI is almost entirely paid by employers. In general, if you’re subject to the former, you’ll also have to cover the latter.

Employers who miss tax payment deadlines or fail to submit tax returns on time might be asked to transfer the amount they owe to a special trust account in Missouri. They might also be subject to penalties if the Director of Revenue discovers that the remittance of withheld taxes might be late.

Payroll tax due dates in Missouri

There are three tax pay periods in Missouri: monthly, quarterly, and yearly. How often an employer has to file their taxes depends on the tax amount deducted. When it comes to newly registered employers, they’ll first get an estimation of how much tax they'll owe. Based on this, they’ll get assigned a filing frequency. Here are the filing deadlines:

• Monthly: Taxpayers who owe $500 in tax per month for a minimum of two months during the past 12 months should file taxes monthly. They have three banking days to settle the payment for the periods finishing on the 7th, 15th, 22nd, and the last day of the month. If a payment falls in a month that isn’t the end of the calendar quarter (for example, January or April), it must be paid by the 15th day of the month after the month in which the tax was withheld. 
• Quarterly: Employers who withhold at least $100 in tax per employee per quarter for at least one quarter during four past quarters can file their returns and pay taxes quarterly. Payments must be made by the final day of the month that follows the end of the quarter. Quarterly payments also apply to local taxes in Kansas City and St. Louis.
• Annually: Employers who owe less than $100 in tax per employee for each of the past four quarters must file taxes once per calendar year. Payments are due by the last day of January.

Quarter-Monthly Payments: Payment is required within three banking days of the periods ending the 7th, 15th, 22nd, and the last day of a month.

How to submit payroll taxes in Missouri

With the type of payroll taxes and filing dates covered, we can now move on to discussing how you can submit payroll taxes in Missouri. 

The Missouri Department of Revenue requires all taxpayers to file and pay payroll taxes online with a credit card or e-check. They can do it either via their MyTax Missouri portal account or in a paper form by filing the MO-941, which can be found on the Missouri Department of Revenue website. In order to use MyTax Missouri, you’ll need to have a valid Missouri Tax ID and PIN number. You also have to correctly identify your filing period. 

Electronic Bank Draft (E-Check)

To pay by e-check, you’ll need your bank routing number, checking account number, and the number of your next check. You’ll also have to pay a small transaction and handling fee per filing period. 

Credit Card

The filing system accepts four credit cards: MasterCard, Discover, Visa, and American Express. You’ll be subject to a convenience fee if you decide to pay by debit or credit card. 

TXP Bank Project (TXP)

The third option to settle your payroll taxes is via the TXP Bank Project. If you provide your bank with your payment and report information, they will transfer your tax return on your behalf. The bank will convert the data into a CCD+ format allowing the transfer of your tax return information, along with an authorized Automated Clearing House (ACH) credit to the Revenue Department. All Missouri taxpayers who fill out Form MO-941 are free to use this option. Bear in mind that if you pay taxes quarterly via ACH credit, then your bank must use code 0115P during payment submission. 

Rippling’s full-service payroll software

If you want to make sure that your taxes are always paid correctly and on time, then Rippling payroll software is your best choice. You can forget about manual paperwork as Rippling does it all for you automatically. 

FAQs about Missouri payroll taxes

Are there local tax laws in Missouri?

 Yes, two cities—Kansas City and St. Louis—require employers to withhold and pay local taxes.

Can your tax returns be audited in Missouri?

Tax returns can be audited in Missouri. At the federal level, they’re usually conducted by the IRS. If they notice a discrepancy on the tax return form filled out by a business, individual, or nonprofit organization, they might run an audit to determine if any mistakes were made. Depending on what they discover, the taxpayer may be subject to penalties or tax liability adjustments. 

Similarly, the Missouri Department of Revenue runs audits at the state level and has the right to verify numerous state tax returns such as income tax, sales tax, use tax, and others. Both authorities run audits to ensure compliance with federal and state laws. 

Are nonprofit organizations subject to payroll taxes in the state of Missouri?

Nonprofit organizations operating in Missouri can apply for a few tax exemptions in the state. Among others, they can file a request to the IRS for federal income tax relief. Additionally, the city of St. Louis offers a 0% Payroll Expense tax rate for not-for-profit organizations. These include charitable and religious institutions, hospitals, social services, fraternal organizations, and federal and state departments and agencies.

What form do Missouri employers fill out for Employer Withholding tax? 

There are three types of forms Missouri employers, including small businesses, need to fill out for tax withholding purposes:

• Form MO-941, Employer Return of Income Taxes Withheld. Depending on the schedule, this form must be filled out on a monthly, quarterly, or annual basis. It’s submitted to the Miss File and paid online via the Missouri Department of Revenue.
• Form MO-941P, Quarter-Monthly Withholding Tax Payments, which is due on a monthly or quarterly basis. It can only be filed electronically. 
• Form MO-W3, Transmittal of Wage and Tax Statements. It’s filed once a year, and the due date for submissions is the last day of February.

All three forms must be submitted to the Missouri Department of Revenue.

For employers to withhold correct federal income tax, they’ll need to receive a completed form MO W-4 from their employees, declaring their filing status and allowing their employer to withhold wages for taxes.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for, tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.