Refund

Article Dean Dorton

Kentucky is one of a handful of states where local taxing jurisdictions, such as cities, counties, and school districts, impose income taxes. These local taxes, called “occupational license fees,” generally are imposed on a business’s net profits and employee salaries, wages, or other compensation. Employers must withhold local taxes from employees’ pay for work performed within the local jurisdiction. Tax rates vary and generally range from about 0.5 to 2.5 percent.

Kentucky law permits employees to file for a refund from a local jurisdiction if their employer withheld taxes for that jurisdiction while they worked in another jurisdiction, either within or outside Kentucky. For example, suppose an employee lives and works in Louisville Metro, which imposes a tax of 2.2 percent on resident employees’ compensation. However, the employee spends one month of the year on an assignment in Tennessee. The employee might apply for a refund from Louisville Metro if the employer continued withholding Louisville Metro taxes while the employee worked in Tennessee.

Note that if employees work in another Kentucky locality during the period for which they are seeking a refund, taxes would be owed to the other local jurisdiction. This scenario could arise with greater frequency this year due to the large number of employees working from home because of the pandemic.

For example, suppose the employee normally works in Woodford County but has been working from home in Jessamine County for most of the year. Woodford County levies an occupational license fee of 1.5 percent, while Jessamine County’s rate is 1 percent. The employee owes Jessamine County tax on the compensation earned while working from home. If the employer continues withholding tax for Woodford County, the employee could seek a refund.

Refund claims must be filed within two years from the due date of the employer’s tax return, which in many localities is February 28. Some of the larger jurisdictions, such as Louisville and Lexington, have refund application forms available on their websites. The refund application for Louisville Metro is available here and for Lexington is available here.

Refund application for Louisville MetroRefund application for Lexington

Article Dean Dorton

If you’re like many Americans, you may not start thinking about filing your tax return until the April 15 deadline (this year, April 18) is just a few weeks — or perhaps even just a few days — away. But there’s another date you should keep in mind: January 19. That’s the date the IRS began accepting 2015 returns, and filing as close to that date as possible could protect you from tax identity theft.

How filing early helps

In this increasingly common scam, thieves use victims’ personal information to file fraudulent tax returns electronically and claim bogus refunds. When the real taxpayers file, they’re notified that they’re attempting to file duplicate returns.

Tax identity theft can cause major headaches to straighten out and significantly delay legitimate refunds. But if you file first, it will be the thief who is filing the duplicate return, not you.

Another key date

Of course you need to have your W-2s and 1099s to file. So another key date to be aware of is February 1 — the deadline for employers to issue 2015 W-2s to employees and, generally, for businesses to issue 1099s to recipients of any 2015 interest, dividend or reportable miscellaneous income payments.

An added bonus

Let us know if you have questions about tax identity theft or would like help filing your 2015 return early. An added bonus of filing early, if you’ll be getting a refund, is enjoying that refund sooner.