Springfield will start collecting a payroll tax from employees and employers starting Jan. 1, 2027, the city announced Thursday, Oct. 22.

The City Council unanimously adopted an ordinance in June approving the tax at a rate of 0.1% for each group.

The tax, which will support city services, applies to employers and employees associated with a business location within Springfield city limits, as well as self-employed individuals and independent contractors with a physical location in Springfield, according to the city. 

Employers will report and pay both portions of the tax through quarterly returns, the city said. The tax applies to pay periods beginning on or after Jan. 1, 2027. 

Self-employed individuals and independent contractors will file and pay annually. 

Employer registration opens March 1, 2027, and first quarterly returns are due April 30, 2027. The first annual returns for those who are self-employed or independent contractors are due April 15, 2028.

The new tax is part of the city’s effort to address the growing general fund deficit. 

The rate can’t be changed for three years, and staff should review the tax in 2030 to determine its impact on the general fund, the city code states.

For a worker earning $50,000 annually, the employer and the employee will each pay $50 per year in tax. The tax is expected to generate $2.45 million within its first year. 

The city has more information about the tax on its website, as well as a tool to check whether a business is within city limits.