As a company owner, you must keep up with federal payroll taxes, including Social Security and Medicare. There are also state payroll taxes that vary by location, and Kentucky is no exception. Fortunately, the state’s tax rate and standard deduction are relatively simple to calculate and withhold.
As a Kentucky employer, you must pay and withhold several payroll taxes from employees’ paychecks. Those include state income tax and state unemployment insurance (SUI). State income tax helps fund the state’s schools, roads, and healthcare. SUI provides temporary payments to workers who lose their jobs through no fault of their own. The Kentucky state legislature sets SUI rates and taxable wage base annually.
In addition, you must collect federal income tax from your employees, and withhold it unless they complete a W-4 form indicating that they don’t want any taxes withheld. Employees must also save their completed W-4 forms for their records. Employees should keep their forms updated as they experience life events that could affect their tax status or exemptions.
Kentucky has a flat state tax rate of 5%, which makes it easy for businesses to calculate salaries and withhold taxes. But the state does have specific filing and payment requirements, such as reporting and depositing employment taxes on a twice-monthly basis.
Additionally, local governments can impose additional local taxes on businesses operating within their borders, such as business and occupational taxes. Kentucky has reciprocal agreements with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin to ensure that only one state’s taxes are withheld from an employee’s paycheck. However, Kentucky does not impose a general sales or use tax on its residents.
Kentucky Withholding Tax Payment
Whether you’re a small business owner or the leader of a major corporation, staying on top of payroll taxes is complex. From federal income tax to US FICA taxes (Social Security and Medicare), there’s much to track for every employee you pay. Add in state employment taxes, and things can get really complicated.
The good news is that Kentucky withholding taxes are pretty simple to calculate and submit. You can make a Kentucky withholding tax payment online, via ACH credit or by sending a paper check to the Department of Revenue. To make a payment online, visit the Kentucky Department of Revenue’s EEPS site and select “Individual Income Tax – Estimated Payment (Account Number is Social Security Number)” as your account type. You’ll need to have a valid email address to use this system.
You’ll need to create a new user name and password if you don’t already have one, and the department doesn’t allow shared accounts. The state’s website has detailed instructions on how to do this. The Kentucky Department of Revenue also accepts payment by phone, but you must call before the due date to make a payment. If you’re unable to pay by the due date, you should report the unpaid amount on the next available withholding tax return segment in WRAPS. To report the unpaid withholding, you’ll need to complete voucher form 740-ES and attach a check or money order payable to “Kentucky Department of Revenue Withholding Tax”. Then, mail the voucher and payment to the appropriate state agency.
