Kentucky Unfiled Sales Tax Returns Checklist

on the amount of sales and use tax reported annually, not on the vendor's chosen sales volume. Sales tax returns are primarily due monthly, but the Department allows less frequent filing based on annual sales tax liability. The Department adjusts filing frequencies programmatically each June.

Businesses with a monthly tax liability of $1,200 or more are typically assigned a monthly filing. Those with liabilities between approximately $100 and $1,200 are assigned a quarterly filing. Those with an annual liability of $100 may be assigned an annual filing. When a return is not filed by its due date (generally the 20th of the month following the reporting period), it remains unpaid and unreconciled with the state. This creates a record showing the business as non-compliant for that filing period and may trigger collection.

Why the State Issued This or Requires This

Kentucky requires all registered sales tax vendors to file and pay sales tax on a predictable schedule. This allows the state to collect revenue, track compliance, and manage its tax system efficiently. When returns go unfiled, the state cannot verify whether tax was collected, correctly reported, or remitted through proper tax payments.

According to the Kentucky Department of Revenue, unfiled sales tax returns trigger an administrative review because the state must account for all tax liabilities. Common reasons returns remain unfiled include business closures, missed deadlines, address

changes on file, or confusion about filing requirements. The state's process of identifying and contacting businesses with unfiled returns is a standard compliance and collection function.

What Happens If This Is Ignored

If unfiled sales tax returns are not addressed, Kentucky typically continues escalating its collection efforts through the Division of Collections. The state may issue additional notices, attempt phone or mail contact, and eventually pursue formal collection actions.

In many cases, the state estimates tax liability for unfiled periods based on prior filing history or other available information, which may result in assessed amounts that differ from actual tax owed.

Under Kentucky tax laws, specifically KRS 131.180, the state imposes specific penalties for unfiled returns. The failure-to-file penalty is 2% of the total tax due for every 30 days, or fraction thereof, that a tax return is late. The maximum penalty is 20 percent of the total tax due. If filed after a jeopardy assessment, the minimum penalty is $100; otherwise, the minimum is $10.

Additionally, a late payment penalty of 2 percent of the total tax due for every 30 days, or fraction thereof, that payment is late applies, with the same 20 percent maximum and

$10 minimum. These penalties are separate from the negligence penalty (10 percent of the assessed tax) or the fraud penalty (50 percent of the assessed tax) that may apply in certain circumstances. Interest also accrues on unpaid balances. Over time, unpaid sales tax accounts can lead to tax liens, tax levies, or other enforcement measures.

What This Does NOT Mean

An unfiled return does not automatically mean criminal charges have been filed or that your business license has been revoked. It also does not mean the state has frozen your business accounts or that you are required to cease operations immediately.

Unfiled returns represent a tax compliance problem, not a final enforcement action. The state typically issues notices and provides opportunities to respond before pursuing more serious collection remedies.

Having unfiled returns does not mean you automatically owe a specific amount; the actual liability depends on the actual sales tax collected during those periods. Receiving a notice or discovering unfiled returns is a signal to take action, not a sign that resolution is impossible. A payment plan may be available if you cannot pay the full balance immediately.

Checklist: What to Do After Receiving This or Identifying

This Issue

Step One: Locate Your Sales Tax Account Information

1. Find all Kentucky Department of Revenue notices or correspondence related to your account.

2. Identify your sales tax account number (typically appears on notices) and ensure you have your tax account ID for online access.

3. Confirm the business name and address on file with the state.

4. Note any filing periods mentioned in the notice and verify whether these periods fall within the statute of limitations for assessment.

5. Gather all sales tax returns already filed to understand your filing history.

Step Two: Review Your Business Records for the Unfiled Periods

1. Locate your sales records or accounting files for the period(s) in question.

2. Calculate the total sales and taxable sales for each unfiled period to determine accurate tax obligations.

3. Determine the sales tax that was collected from customers during those periods.

4. Check whether tax payments were made to the state, even if returns were not filed.

5. Document any exceptional circumstances (business closure, ownership change, accounting errors, financial hardship).

Step Three: Contact the Kentucky Department of Revenue

1. Call the Division of Sales and Use Tax at (502) 564-5170 to speak with a representative about your sales tax account.

2. The Customer Contact Center can also assist with general inquiries regarding state tax matters at (502) 564-4581.

3. Provide your sales tax account number and the filing periods in question.

4. Ask which returns are unfiled and what the current status of your account is.

5. Request clarification on any penalties or interest assessments that have already been applied.

6. Ask whether the state has provided an estimate of the amount due for unfiled periods.

7. Request written confirmation of the unfiled periods and any current balance due.

8. Confirm your assigned filing frequency and verify the due dates for returns

(generally the 20th of the month following the reporting period).

Step Four: Register for Electronic Filing Through MyTaxes

1. Kentucky requires online filing and payment for all sales and excise tax returns.

2. All monthly, quarterly, and annual filer frequency accounts must file electronically through the MyTaxes.ky.gov portal.

3. Visit MyTaxes.ky.gov and create an account or log in if you already have one.

4. If you need to pay taxes online or set up access, you may need to reset your password if you have forgotten your login credentials.

5. Register your business for electronic filing if you are not already enrolled, and ensure all taxpayer data is accurate.

6. The Department will only consider exemptions for businesses without internet access.

Step Five: Prepare the Unfiled Returns Electronically

1. Log in to your MyTaxes.ky.gov account to access the sales tax filing system.

2. Complete returns for each unfiled period using your actual sales and tax records.

3. Calculate the tax due for each period (Kentucky sales and use tax is six percent of gross receipts or purchase price).

4. Ensure all required information is included (account number, period dates, gross sales, taxable sales, tax collected).

5. The system accommodates filing for current and prior periods, though a zero filing of return is still required even if no sales occurred during a period.

Step Six: Submit the Unfiled Returns Electronically

1. Submit completed returns through the MyTaxes.ky.gov portal to file return documentation for each unfiled period.

2. The electronic system will provide immediate confirmation of receipt.

3. Print or save confirmation receipts for your records.

4. Keep copies of each completed return for your records.

5. Electronic filing is the required method for all sales and excise tax returns in

Kentucky.

Step Seven: Address Any Tax Payment or Balance Due

1. Calculate the total amount due across all unfiled periods, including penalties and interest.

2. Determine whether you can pay in full.

3. If unable to pay in full, contact the Division of Collections at (502) 564-4921 to request a payment plan or payment agreement.

4. Payment plans require consistent payments; missing payments can result in default and may lead to a notice of levy or other collection actions.

5. Keep records of all tax payments made, including confirmation numbers and dates.

6. If you believe you qualify for a tax refund for any period, you may file a refund claim separately after resolving the unfiled returns.

Step Eight: Address Penalties and Interest

1. Request itemized documentation showing penalties and interest applied to your account, including any late fee assessments.

2. Review the calculation to confirm accuracy based on the unfiled dates and payment dates.

3. Kentucky may consider a penalty waiver for reasonable cause under specific circumstances, but not for negligence penalty or fraud penalty cases.

4. Contact the Division of Sales and Use Tax at (502) 564-5170 to discuss penalty relief options if extraordinary circumstances contributed to unfiled returns.

5. Be prepared to provide documentation supporting your request for any tax resolution.

Step Nine: Confirm Future Filing Compliance

1. Verify your assigned filing frequency with the Department of Revenue (monthly, quarterly, or annual).

2. Understand that the Department adjusts filing frequencies programmatically each

June based on annual sales tax liability.

3. Set reminders or calendars for all future return due dates (generally the 20th of the month following the reporting period).

4. For businesses with monthly sales and use tax liability of $10,000 or more, accelerated monthly filing is due by the 25th of the current tax period.

5. Consider working with an accountant or bookkeeper to ensure timely future filings and avoid future tax problems.

6. Remember that sales tax obligations are separate from income tax return requirements, such as Form 740 for Kentucky residents filing individual income taxes.

Step Ten: Maintain Documentation and Follow Up

1. Keep copies of all returns you submit through the electronic system.

2. Save all correspondence from the Kentucky Department of Revenue.

3. Retain receipts or confirmation numbers for all payments made.

4. Document the dates you contacted the state and the names of representatives you spoke with.

5. If you do not receive acknowledgment within 30 days, contact the Division of

Sales and Use Tax at (502) 564-5170 to confirm receipt and processing status.

What Happens After This Is Completed

Once you have submitted unfiled returns and any associated payments, the Kentucky

Department of Revenue typically processes the filing and updates your account records.

The state reviews the returns to verify completeness and accuracy. In many cases, the state applies the tax liability shown on your returns to your account and adjusts any previously estimated amounts.

The Department of Revenue typically processes returns and updates accounts within 30 to 45 days. If you have submitted a payment, the state applies that payment to your account balance. Depending on the circumstances, the state may issue a revised notice showing an updated balance due (if any) or confirming that your account is current. If a payment agreement was established, the Division of Collections will monitor compliance with the payment schedule.

Common Mistakes to Avoid

Missing state communication: Ignoring notices or follow-up requests from the

Department of Revenue delays resolution and allows penalties to continue accruing.

Respond to all state correspondence promptly to avoid escalation of the collection process.

Attempting to use paper forms: Kentucky requires electronic filing. Trying to mail paper returns when electronic filing is required will delay processing and may not satisfy filing requirements.

Submitting incomplete returns: Returns missing required information (such as tax collected, account number, or period dates) may be rejected or require resubmission.

Review all the necessary fields before submitting electronically to avoid failure-to-file issues.

Not understanding your filing frequency: Filing frequency is assigned by the

Department of Revenue based on your annual sales tax liability and is adjusted each

June. Contact the Division of Sales and Use Tax to confirm your current filing frequency.

Missing the correct due date: Most returns are due by the 20th of the month following the reporting period. Businesses with $10,000 or more in monthly liability are required to file on or before the 25th of the current month.

Confusing sales tax with other state taxes: Sales and use tax is distinct from income taxes, property taxes, or local taxes. Each has separate filing requirements and deadlines.

Assuming the issue resolves on its own, Unfiled returns do not disappear over time.

The longer they remain unfiled, the more penalties and interest accumulate, potentially leading to tax liens or tax levies on business or personal property.

Frequently Asked Questions

If I have not filed returns for multiple years, do I need to file all of them?

A: Yes. Vendors are responsible for filing all required returns for all periods in which they were registered. The state will identify unfiled periods through its records, and you are responsible for submitting returns for those periods electronically through

MyTaxes.ky.gov. The statute of limitations for assessment is four years from the later of the return due date or return filing date.

Can I file unfiled returns electronically?

Yes. Electronic filing is mandatory for all sales and excise tax returns in Kentucky, including unfiled returns from prior periods. All filers must use the MyTaxes.ky.gov portal. The system accommodates filing for current and previous periods.

What are the penalties for unfiled returns?

Kentucky imposes a failure-to-file penalty of 2 percent of the total tax due for each

30-day period, or fraction thereof, that a tax return is late, with a maximum penalty of 20 percent. The minimum penalty is $10 (or $100 if filed after a jeopardy assessment).

Additionally, a late payment penalty of 2% per 30 days applies, with the same maximum and minimum. These are separate from any negligence penalty or fraud penalty that may apply.

When are sales tax returns due?

Kentucky sales tax returns are generally due by the 20th of the month following the reporting period. Businesses with monthly sales and use tax liability of $10,000 or more must file by the 25th of the current tax period. If the due date falls on a weekend or holiday, the deadline extends to the next business day.

Can I get penalties reduced if I file unfiled returns?

Kentucky may consider a penalty waiver for reasonable cause under specific circumstances. Contact the Division of Sales and Use Tax at (502) 564-5170 to discuss your situation and request penalty relief. Be prepared to explain extraordinary circumstances that contributed to the unfiled returns and provide supporting documentation.

What if I cannot afford to pay the full amount owed?

Contact the Division of Collections at (502) 564-4921 to request a payment plan or payment agreement. Payment plans allow you to pay tax liabilities over time through scheduled installments. Missing payments on an approved plan can result in default and may trigger a notice of levy or tax lien filing.

Facing State Tax Enforcement Action?

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