Kentucky Payroll Tax Payment Plan Options Checklist
Kentucky payroll tax nonpayment occurs when an employer fails to remit withheld income taxes to the Kentucky Department of Revenue on time. This issue triggers penalties, interest charges, and potential enforcement actions, including liens and levies. Employers must act quickly to minimize financial consequences and restore compliance with Kentucky Revised Statutes.
What This Issue Means
When you receive a Kentucky payroll tax nonpayment notice, it means the Department of Revenue has not received your Kentucky Withholding Tax payments by the required deadline. Kentucky employers must withhold state income tax from employee wages and remit it according to their assigned filing frequency. For 2026, the Kentucky
Withholding Tax rate is 3.5%, reduced from 4% in 2025.
The notice typically includes the tax periods in question, the amount due, and any penalties or interest that have already been assessed. Interest accrued on unpaid tax
liability compounds at 9% annually for 2026 (10% for 2025) under Kentucky Revised
Statutes 131.183. Late payment penalties equal 2% of the total tax due for each 30-day period or fraction thereof, with a maximum of 20% and a minimum of $10.
Why the State Issued This Notice
The Kentucky Department of Revenue issues nonpayment notices when required tax payments are missing or incomplete. These taxes represent amounts withheld from employee paychecks, which the state considers trust funds held on behalf of employees. Failure to remit these funds on time violates Kentucky payroll taxes laws under Kentucky Revised Statutes Chapter 141.
Employers receive payment obligations based on their annual withholding amount
those withholding under $400 annually file by January 31; those withholding $400 to
$1,999 file quarterly; those withholding $2,000 to $49,999 file monthly by the 15th; and those withholding $50,000 or more file semi-monthly on the 10th and 25th. Electronic filing and payment through the MyTaxes portal became mandatory on January 1, 2022, per administrative regulation 103 KAR 18:150.
What Happens If This Is Ignored
Ignoring a Kentucky payroll tax nonpayment notice leads to escalating consequences and increased tax debt. The Department of Revenue will continue assessing penalties and interest, increasing the total amount past due. After administrative notices, the state may file a certificate of delinquency against your business and personal property, which becomes public record and damages credit ratings.
Further enforcement of penalties includes bank levies, wage garnishments, and seizure of business assets through legal proceedings. Kentucky law allows the Department to pursue personal liability against corporate officers and responsible parties who control payroll functions under Kentucky Revised Statutes 141.340. In cases of willful failure to remit withheld taxes, criminal penalties under Kentucky Revised Statutes 141.990 may apply, including prosecution for a Class D felony.
The state may also revoke business licenses and suspend your ability to operate legally within Kentucky. Legal remedies available to the state include continuous garnishment of bank accounts and business income until the full tax liability is satisfied.
Emergency Response Checklist
Step 1: Review the Notice Carefully
Read the entire notice to identify the specific tax periods, amounts due, penalties, and interest accrued on your tax debt. Note the notice date and any deadlines for response or payment identification. Contact the MyTaxes Customer Contact Center at (502)
764-5555 during business hours (6:00 AM to 6:00 PM Eastern Time) if you have questions about the notice.
Step 2: Gather Payroll Records
Collect all payroll records for the periods listed in the notice, including wage and tax statement documentation, tax withholding calculations, and prior payment receipts.
Kentucky requires employers to maintain payroll records for at least four years after the withholding return is filed or its due date, whichever is later, under 103 KAR 18:090.
Organize documents by quarter to facilitate accurate reporting and ensure tax compliance.
Step 3: Register for MyTaxes Portal Access
If you have not already done so, register for the MyTaxes portal at MyTaxes.ky.gov, the official Kentucky tax filing system. You will need your Kentucky Withholding Tax Account
Number (6 or 9 digits) and your Tax ID number. This portal is required for all electronic filing and payment transactions; paper filing is no longer accepted for withholding tax returns.
Step 4: Determine Which Forms to File
Kentucky Withholding Tax returns use Form K-1 (Employer's Return of Income Tax
Withheld) for periodic filings and Form K-3 for annual reconciliation. Your filing frequency determines which periods require Form K-1: quarterly filers submit K-1 for the first three quarters and K-3 annually; monthly filers submit K-1 for the first eleven months and K-3 annually; semi-monthly filers submit K-1 for each period and K-3 annually. Employers must file online through the MyTaxes portal to meet state requirements.
Step 5: Prepare and File Missing Tax Returns
Log in to the MyTaxes portal and complete the missing tax returns for each period identified in the notice. Enter gross wages paid, Kentucky income taxes withheld, and any credits or adjustments. Double-check all calculations before submitting, as errors will delay resolution and may trigger additional notices from the Department of
Revenue.
Step 6: Calculate Total Liability
Calculate your total tax liability, including unpaid taxes, penalties, and interest accrued on the outstanding balance. Penalties accrue at 2% of the total tax due per 30-day period (or fraction thereof), capped at 20% with a $10 minimum. A collection fee of 25% may be added to unpaid tax due 60 days after the original notice date under Kentucky
Revised Statutes 131.440.
Contact the Division of Collections at (502) 564-4921 if you need assistance calculating your total past-due amount. Understanding the full extent of your tax debt helps you make informed decisions about payment options.
Step 7: Submit Tax Payments Immediately
Make tax payments electronically through the MyTaxes portal using available payment options, including ACH debit from your bank account or credit card (processing fees may apply). Reference your Kentucky Withholding Tax Account Number and the specific tax periods when submitting payment. Keep confirmation receipts for all transactions as proof of payment to the Department of Revenue.
If you can pay immediately, doing so stops further interest accrual and penalties.
Processing through the National Automated Clearinghouse Association network typically takes one to two business days for electronic transfers.
Step 8: Request an Installment Payment Plan if Needed
If you cannot pay the full amount immediately, contact the Division of Collections at
(502) 564-4921 to request an installment payment plan. Payment plans are not automatically granted; approval depends on your compliance history, the amount owed, and your ability to pay. A down payment may be required to establish the agreement.
Continue making all current Kentucky payroll tax payments on time, while negotiating past-due balances and missing current payments; failure to do so while on an installment payment plan may result in default and immediate enforcement actions.
Step 9: Consider Penalty Relief for Tax Compliance
Kentucky allows penalty waivers for reasonable cause under Kentucky Revised
Statutes 131.175 and 103 KAR 1:040, including first-time violations caused by human error beyond your control. Submit a written request explaining the circumstances that prevented timely payment, along with supporting documentation. Interest accrued cannot be waived under Kentucky law, even if penalties are abated.
Special relief may be available for businesses affected by declared disaster areas under federal or state emergency declarations. Contact the Department of Revenue to inquire about disaster relief provisions and extended filing deadlines.
Step 10: Document Everything for Tax Compliance
Maintain copies of all notices, correspondence, filed tax returns, payment confirmations, and penalty waiver requests. Kentucky law requires retaining these records for at least four years under 103 KAR 18:090. Organized documentation protects you during audits and helps resolve disputes about payment history or filing status with the Kentucky
Department of Revenue.
Keep separate files for current-year compliance and past-due resolutions to avoid confusion. Accurate recordkeeping demonstrates good-faith efforts toward tax compliance if disputes arise.
Step 11: Monitor for Confirmation
After filing and paying, monitor your MyTaxes account and mail for confirmation that the
Department of Revenue has processed your tax returns and payments. Processing times vary, but you should see account updates within two to four weeks. If discrepancies appear or certificates of delinquency remain on your account after payment, contact the Department immediately at (502) 764-5555.
Request written confirmation that all tax liability has been satisfied and that any certificate of delinquency has been released. This documentation is essential for clearing public records and restoring your credit standing.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 12: Maintain Future Tax Compliance
Establish systems to ensure all future Kentucky Withholding Tax obligations are filed and paid on time according to your assigned frequency. Set calendar reminders based on your filing schedule, review payroll procedures regularly with your payroll staff, and consider consulting a payroll tax professional if compliance challenges persist. Ongoing tax compliance prevents recurrence and protects against escalated enforcement of penalties.
Verify that your Kentucky Withholding Tax Account Number is correctly linked to all filing and payment transactions. Ensure coordination between your payroll system and the
MyTaxes portal to avoid future discrepancies.
Common Mistakes to Avoid
Do not ignore notices from the Kentucky Department of Revenue; hoping they will resolve themselves is not an option. Penalties and interest continue to accrue daily.
Avoid filing incomplete or inaccurate tax returns, which trigger additional correspondence and delay resolution. Do not assume penalties are automatically waived; you must submit a formal request with documentation to the Department of
Revenue.
Never miss current filing deadlines while resolving past tax debt; the Department requires both current tax compliance and resolution of past-due amounts. Failing to maintain business licenses while owing tax liability can result in suspension of your legal authority to operate.
Frequently Asked Questions
How far back can the Department assess unpaid Kentucky payroll taxes?
Kentucky generally has four years from the due date or filing date to assess income taxes, though this period extends if tax returns were never filed or fraud is suspected.
Can I file missing tax returns electronically?
Yes, the MyTaxes portal supports filing of both current and past-due Kentucky
Withholding Tax returns for all open periods using your Kentucky Withholding Tax
Account Number.
Will my business licenses be affected by tax debt?
Unpaid Kentucky payroll taxes can result in administrative actions affecting business licenses and permits, depending on the amount owed and compliance history with the
Department of Revenue.
How long does payment processing take?
Electronic tax payments through MyTaxes typically post within 1 to 2 business days via the National Automated Clearing House Association network; account updates reflecting filed returns may take 2 to 4 weeks.
What is a certificate of delinquency?
A certificate of delinquency is a public record filed by the Kentucky Department of
Revenue establishing a lien against your property for unpaid tax liability, similar to legal proceedings for debt collection.
Do I need professional help?
Professional assistance is recommended if you owe substantial tax debt, face potential liens or levies, or need guidance on penalty abatement and installment payment plan negotiations with the Department of Revenue.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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