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Withholding Taxes: Kentucky

Withholding Taxes requirements for other states

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

  • Wages paid to a nonresident of Kentucky for work performed in Kentucky are subject to withholding, except for wages paid to employees of states that have entered into a reciprocal agreement with Kentucky. Kentucky has a reciprocal agreement with five other states. See Withholding on Residents, Nonresident and Expatriates.
  • Effective beginning on or after tax year January 1, 2018, the graduated income tax tables are replaced with a flat income tax rate of 5% and withholding tax exemptions are no longer taken into account (only the standard deduction is taken into account) on Kentucky Form K-4, Employee's Withholding Exemption Certificate. There are four categories under which an employee may claim exempt from withholding on Form K-4. See Employee's Withholding Allowance Certificate.
  • Tax on supplemental wages is determined differently depending on whether the supplemental wages are paid together or separately from regular wages. See Supplemental Wages.
  • Employers must provide the designated copies of Form K-2, Wage and Tax Statement, to their employees by January 31. Terminated employees must be provided with the form within a certain number of days after termination. See Form W-2 Requirements.
  • For income tax withholding purposes, Kentucky employers must keep certain records for four years after the date the related return was filed, or the date the tax was paid, whichever is later. See Recordkeeping Requirements.