Kentucky W-2 filing requirements have two parts: give every employee a W-2 that reports Kentucky wages and withholding by January 31, and file that same data with the Kentucky Department of Revenue by the same date. The state portion of the W-2 is sometimes called the Form K-2, but it isn’t a separate document. It’s Boxes 15 through 20 of the federal W-2, filled in with Kentucky-specific information.1Kentucky Department of Revenue. Employer Payroll Withholding
What the Kentucky Boxes Must Show
The Kentucky information on a W-2 lives in Boxes 15 through 20. Box 15 takes your six-digit Kentucky withholding account number, which is different from your federal EIN. If you haven’t registered for one, you apply through the MyTaxes portal at MyTaxes.ky.gov or by filing a paper Kentucky Tax Registration Application.2Kentucky Department of Revenue. Business Registration3Commonwealth of Kentucky Department of Revenue. Transmitter Report for Filing Kentucky W2/K2, 1099 and W-2G Statements
Box 16 shows total wages subject to Kentucky income tax for the year. Box 17 shows the Kentucky income tax you actually deducted from the employee’s paychecks.4Commonwealth of Kentucky Department of Revenue. Schedule KW-2 Kentucky Income Tax Withheld Boxes 18, 19, and 20 handle local occupational taxes, which get their own attention below.
Local Occupational Taxes in Boxes 18 Through 20
Kentucky cities and counties impose their own occupational license taxes on wages. Rates run from about 0.50% to 2.5%, with most jurisdictions near 1%. The tax follows where the employee physically works, not where they live, so one employer with staff spread across several jurisdictions can end up reporting different local amounts on different W-2s.
Box 18 is local wages, Box 19 is local tax withheld, and Box 20 identifies the locality. If an employee worked in more than one jurisdiction during the year, each locality may need its own line. Getting the jurisdiction wrong routes withheld tax to the wrong local government, which is how employers end up with collection notices from the right one.
When Reciprocity Changes What You Report
Kentucky has income tax reciprocity with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin.5Kentucky Legislative Research Commission. 103 KAR 17:140 Individual Income Tax – Reciprocity – Nonresidents An employee who lives in one of those states and works in Kentucky can be exempt from Kentucky income tax on wages and salaries. When the exemption applies, you don’t withhold Kentucky tax, and Boxes 16 and 17 are not used for Kentucky wages.
Some conditions narrow the exemption. Virginia residents qualify only if they commute daily. Ohio residents don’t qualify if they hold a 20% or greater equity interest in the S corporation paying their wages. And any employee from a reciprocal state who keeps living quarters in Kentucky and spends more than 183 days here in the year is treated as a Kentucky resident regardless of home-state domicile.5Kentucky Legislative Research Commission. 103 KAR 17:140 Individual Income Tax – Reciprocity – Nonresidents
To claim the exemption, the employee files Form 42A809, Certificate of Nonresidence, with you. Keep it on file. If the employee’s residency changes, they are required to notify you within ten days.6Commonwealth of Kentucky Department of Revenue. Certificate of Nonresidence (Form 42A809)
The January 31 Deadline and Getting Forms to Employees
Every employee must have their completed W-2 by January 31 of the year following the tax year, including anyone who left mid-year.1Kentucky Department of Revenue. Employer Payroll Withholding You can deliver a paper copy or provide it electronically. Electronic delivery requires the employee’s affirmative consent first. Without that consent, mail a paper copy to the last address you have on file.
Filing the Same Data With the DOR
By the same January 31 deadline, you must send the wage and withholding data to the Kentucky Department of Revenue. Your options depend on how many statements you’re submitting.
26 or More Statements
Electronic filing is mandatory. You can submit through the MyTaxes portal at MyTaxes.ky.gov or upload a file in the Social Security Administration’s EFW2 format through the DOR website.1Kentucky Department of Revenue. Employer Payroll Withholding The DOR no longer accepts paper W-2s from bulk filers.
Fewer Than 26 Statements
Smaller employers have two paths. You can file Form K-5 online through MyTaxes, entering each employee’s name, Social Security number, Kentucky wages, and Kentucky tax withheld directly.7Kentucky Department of Revenue. K-5 Filing in MyTaxes Portal Or you can complete Form K-5 as a fill-in form, print it, and mail it to the DOR at 501 High Street, Station 57, Frankfort, KY 40601.1Kentucky Department of Revenue. Employer Payroll Withholding
A paper or CD submission has to include Form 42A806, the Transmitter Report for Filing Kentucky W2/K2, as a cover sheet summarizing the count of statements and the total Kentucky wages and tax withheld. You do not need Form 42A806 when filing electronically through MyTaxes.8Kentucky Department of Revenue. Transmitter Report for Filing Kentucky W2/K2, 1099 and W-2G Statements
Form K-5 also serves as your annual reconciliation. The DOR uses it to check that the total tax you remitted during the year matches the total withholding reported across your W-2s. Mismatches are one of the most common reasons for follow-up notices.
Fixing an Error After Filing
If you find a mistake on a W-2 you’ve already sent out or filed, correct it in two places. Use federal Form W-2C, the Corrected Wage and Tax Statement, to give the employee an updated statement with the right Kentucky wages and withholding.9Internal Revenue Service. About Form W-2 C, Corrected Wage and Tax Statements
For the DOR’s records, file Form K-5C to correct the previously submitted K-5. The K-5C can update the tax year, employee Social Security number, last name, Kentucky wages, and Kentucky tax withheld for any record that needs it.10Kentucky Department of Revenue. Form K-5C Instructions File the correction as soon as you catch the problem so the DOR’s records match what the employee reports on their return.
What Late or Missed Filing Costs
Kentucky’s uniform civil penalties under KRS 131.180 apply to withholding filings. A late return runs 2% of the total tax due for each 30-day period, or fraction of one, up to a maximum of 20%. The minimum is $10. Failing to file at all is 5% of the estimated tax due per 30-day period, capped at 50%, minimum $100.11Kentucky Department of Revenue. Penalties, Interest and Fees
Federal penalties apply separately for W-2s filed late with the Social Security Administration. For returns due in 2026, per-return penalties range from $60 if filed within 30 days of the deadline to $340 if filed after August 1, with higher annual caps for larger businesses. Intentional disregard of the filing requirement is $680 per return with no annual cap.12Internal Revenue Service. Information Return Penalties The per-return amounts look small in isolation, but they stack across every W-2 you owe.
How Long to Keep the Records
Kentucky requires employers to retain copies of all W-2s and related payroll records for at least four years after the withholding return is filed or the tax is paid, whichever is later. This sits in 103 KAR 18:090 and is a state-specific rule, not just general IRS practice.13Kentucky Department of Revenue. 103 KAR 18:090 Payroll Records