Kentucky’s Schedule K-1 (Form PTE) is the information schedule a pass-through entity prepares for each partner, shareholder, or member, reporting that owner’s share of Kentucky-source income, deductions, and credits from the entity’s activity in the state. Partnerships, S corporations, and LLCs use it to tell each owner exactly what to carry to their own Kentucky return. When any owner is a nonresident, the entity has a second job on top of the K-1: withhold Kentucky income tax on that owner’s distributive share and report it on Form PTE-WH, filed with Form 740NP-WH.
What the K-1 Reports and Who Gets One
Every owner of a Kentucky pass-through entity gets a K-1. Residents use it to reconcile Kentucky figures against their federal K-1. Nonresidents use it, together with the PTE-WH, to report Kentucky-source income and claim credit for tax the entity withheld on their behalf.
Every entry on the K-1 must tie back to the totals on the entity’s own return, which is Form 765 for partnerships and LLCs, or the applicable S corporation return. The entity must give each owner a copy of their K-1, with instructions, on or before the date it files the entity return with the Department of Revenue, and it must attach a copy of every K-1 to that return.
The Five Sections of Schedule K-1 (Form PTE)
The form is organized into five sections. Knowing which numbers belong where is most of the work.
Section A — Income, Loss, and Deductions. The longest section. Lines cover Kentucky ordinary business income or loss, rental income, and portfolio income broken into interest, dividends, royalties, and capital gains. It also captures guaranteed payments to partners, Section 1231 gains, charitable contributions, Section 179 expense deductions, and several categories of nondeductible expenses and tax-exempt income. Line 13 reports nonrefundable tax credits passed through to the owner.
Section B — LLET Pass-Through Items. Kentucky and total gross receipts and gross profits used to calculate the limited liability entity tax, plus the LLET nonrefundable credit.
Section C — Apportionment Pass-Through Items. Kentucky receipts and total receipts for single-factor apportionment.
Section D — Three-Factor Apportionment. Kentucky and total figures for property and payroll, used by entities that apportion under KRS 141.121.
Section E — Resident Shareholder Adjustment. Calculates the difference between the Kentucky K-1 amounts and the federal K-1 amounts. Kentucky resident shareholders use this to adjust their returns.
When Nonresident Withholding Kicks In
Under KRS 141.206, a pass-through entity doing business in Kentucky must withhold state income tax on the distributive share allocated to each nonresident individual owner, whether or not the entity actually distributes any cash. The withholding rate is the maximum individual income tax rate set in KRS 141.020. For tax years beginning on or after January 1, 2026, that rate is 3.5 percent. Withholding applies to the owner’s entire Kentucky-source distributive share: ordinary business income, guaranteed payments, interest, dividends, capital gains, and rents.
The obligation extends to any corporate partner or member whose only Kentucky business activity is its ownership interest in the entity. Publicly traded partnerships are excluded entirely. If the entity’s net distributive share income is not subject to Kentucky income tax, such as when the entity has a net loss, no withholding is required.
Resident partners, members, and shareholders are not subject to entity-level withholding at all. Kentucky residents report 100 percent of their share of the entity’s income on their own returns regardless of where the income was earned.
Exemptions That Let You Skip Withholding
Several exemptions can remove a specific nonresident owner from the withholding pool. You do not need to withhold on a nonresident individual who files a form prescribed by the Department of Revenue agreeing to pay the tax personally and who actually files a Kentucky return and pays the tax due. Separately, if the entity can show the Department that a particular owner filed an appropriate Kentucky return for the prior year, it may skip withholding on that owner for the current year, though the Department can revoke this exemption.
Additional exemptions cover situations where the owner is itself a pass-through entity, where the owner is exempt from Kentucky income tax under KRS 141.020, or where the entity is a “qualified investment partnership” under KRS 141.206(14) and the owner is an individual.
Form PTE-WH: One per Nonresident Owner
Form PTE-WH is the per-owner withholding schedule that accompanies the entity’s Form 740NP-WH. You complete one PTE-WH for each nonresident individual, estate, trust, or C corporation partner or member subject to withholding. Each form needs:
- The pass-through entity’s name, address, ZIP code, and FEIN.
- The owner’s name, address, ZIP code, and Social Security Number, or FEIN for a corporate owner. Check the box if the owner is a corporation.
- The owner’s Kentucky-source net distributive share income, pulled from entity records and consistent with the Schedule K-1.
- Any nonrefundable credits from the owner’s K-1 that the entity reasonably expects the owner to claim in the current year. Carryforward credits not on the current K-1 are disallowed.
- The actual amount of Kentucky income tax withheld for that owner during the year.
The completed PTE-WH forms attach to Form 740NP-WH, the entity-level return that reconciles total withholding across all nonresident owners. The owner later uses their copy of the PTE-WH to claim credit for the withheld amount on their personal Kentucky return.
Deadlines, Extensions, and How to File
Form 740NP-WH, along with all PTE-WH schedules, is due by the 15th day of the fourth month following the close of the entity’s tax year. For calendar-year entities that means April 15. If the due date falls on a weekend or holiday, the deadline moves to the next business day.
To get a six-month extension, the entity can do any one of three things: file Form 740NP-WH-EXT before the original due date, attach a copy of the applicable Kentucky business extension (Form 720 EXT or Form 40A102) to the 740NP-WH when filed, or attach a copy of federal Form 7004 to the 740NP-WH when filed by the extended due date. An entity that receives a six-month federal extension automatically qualifies for the same extension on its 740NP-WH as long as the federal extension is attached when the return is filed.
An extension of time to file is not an extension of time to pay. Any balance due must be paid by the original due date, so send the estimated payment with the extension request.
For tax years beginning on or after October 1, 2021, Kentucky requires pass-through entities to file returns and submit payments electronically. The Department of Revenue does not offer direct e-filing through its website; entities must use a supported tax software program. Keep the electronic confirmation receipt as proof of timely filing.
Penalties and Interest
The entity, not the individual owner, is liable for any tax it was required to withhold. Late payments trigger a penalty of 2 percent of the tax due for each 30-day period (or fraction of one) the payment is late, up to a 20 percent maximum. The minimum penalty is $10.
Interest accrues on top of the penalty at a rate the Department sets annually. For the 2026 calendar year the rate on unpaid tax is 9 percent. Interest is statutory and cannot be waived even if the Department abates a penalty. If the balance remains unpaid 60 days after the original notice date, a 25 percent cost-of-collection fee may be added.
Correcting a K-1 After Filing
If the entity discovers an error on a K-1 already filed, it prepares a corrected Schedule K-1 (Form PTE) and checks the “Amended K-1” box in Section E, part (2). The corrected K-1 is submitted as part of an amended entity return, and updated copies should go to the affected owner so they can amend their personal Kentucky return if necessary. Every figure on the amended K-1 must reconcile with the corrected totals on the entity’s amended return.