The Kentucky Department of Revenue has released the 2019 income tax withholding computer formula and wage-bracket tables. The Department has not yet updated its withholding tax guide for 2019, which was last revised in November 2018 to include legislative changes.

The Kentucky 2019 standard deduction amount increases to $2,590, up from $2,530 for 2018.

As we reported previously, effective with tax years beginning on and after January 1, 2018, Kentucky recently enacted a flat 5% income tax rate (HB 366), replacing the graduated personal and corporate income tax tables with this flat rate. Due to this change, all Kentucky taxpayers are taxed at 5% with an allowance for the standard deduction. Revised 2018 withholding tables were released earlier this year, effective June 1, 2018. (EY Payroll Newsflashes Vol. 19, #084, 5-10-2018 and #124, 7-25-2018.)

Legislation eliminates withholding tax exemptions, changes state withholding exemption certificate

Also effective with tax years beginning on and after January 1, 2018, there are no longer any withholding tax exemptions allowed and the 2019 Form K-4, Kentucky Withholding Certificate, is only required to be completed by an individual declaring exemption status or who is requesting additional withholding per pay period. All prior Forms K-4 are obsolete.

The revised Form K-4 also replaces Form K-4E, Special Withholding Exemption Certificate, by including the option to claim exemption from withholding under the remaining four types of exemptions.

Supplemental rate of withholding

Under Kentucky regulations (103 KAR 18:070) the following are instructions for withholding on supplemental wages:

• If supplemental wages are paid at the same time as regular wages, the tax to be withheld shall be determined as if the aggregate of the supplemental and regular wages were a single wage payment for the regular payroll period.
• If supplemental wages are paid at a different time, the employer determines the tax to be withheld by aggregating the supplemental wages either with the regular wages for the current payroll period or with the regular wages for the last preceding payroll period within the same calendar year.

Although the regulation does not provide for a flat supplemental withholding rate, employers may now use the new 5% flat rate for withholding on supplemental wages. (Telephone conversation, withholding tax representative, December 14, 2018.)

2018 Form W-2 filing reminders

As we previously reported, the threshold for mandatory electronic filing of Forms W-2 with the Department is reduced to 26 or more (down from 100 or more), effective January 1, 2018. As a result, employers reporting 26 or more 2018 Forms W-2 are required to file via the Department's website (preferred method) or on CD-ROM.

Employers reporting fewer than 26 Forms W-2 that cannot file electronically or on CD are now required to file new Form K-5, Employer's Report of Withholding Tax Statements, listing the information from the Forms W-2 on Form K-5 rather than submitting the actual Forms W-2. Paper copies of Forms W-2 should not be mailed to the Department; those received by the Department will not be processed and will not be considered filed. Employers are instructed to retain the Forms W-2 for their records and only provide copies upon request. A draft copy of new Form K-5 can be found here. The final version will be posted to the Department's website by January 1, 2019. Employers may also file Form K-5 electronically.

The deadline for filing the 2018 Forms W-2 is January 31, 2019. No extensions will be granted.

For more information, see the 2018 Form W-2 specifications.

For more information, see the Department's website or contact the Department's Withholding Tax Section by e-mail, phone +1 502 564 7287, or fax +1 502 564 3685.

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EY Payroll News Flash