What payroll deductions are employers required to withhold?

Required Payroll Deductions for Employers in Kentucky

Employers operating in Kentucky must withhold specific payroll taxes and deductions from their employees' wages to remain compliant with state and federal regulations. Understanding these requirements is essential for accurate payroll processing and reporting.

Federal Payroll Tax Withholdings

• Federal Income Tax: Employers must withhold federal income tax based on the employee’s Form W-4 and IRS tax tables.
• Social Security Tax: Withhold 6.2% of wages up to the annual wage base limit.
• Medicare Tax: Withhold 1.45% of all wages, with an additional 0.9% Medicare surtax on wages exceeding $200,000 for single filers.

Kentucky State Payroll Tax Withholdings

• Kentucky State Income Tax: Employers must withhold state income tax according to employee withholding certificates and the Kentucky Department of Revenue withholding tables.
• Local Occupational Taxes: Certain cities or counties in Kentucky may require additional occupational or payroll taxes; employers should verify local requirements based on the employee’s work location.

Additional Employer Payroll Responsibilities

• Unemployment Insurance: Employers pay Kentucky unemployment insurance taxes separately; these are not withheld from employee wages but are an important payroll cost.
• Recordkeeping: Maintain accurate records of all payroll deductions and withholdings for at least four years as required by Kentucky law.
• Reporting: Submit withheld taxes to the appropriate federal and state agencies timely to avoid penalties.

As of 2026, employers should regularly review updates from the Kentucky Department of Revenue and the IRS to ensure compliance with any changes in withholding rates or reporting procedures.