Frequently Asked Questions
Here are some frequently asked questions about corporation income tax.
What form do I file?
What authority does Kentucky use for what is required?
Taxpayers can find information on Kentucky requirements in the Kentucky Revised Statutes (KRS) and the Kentucky Administrative Regulations (KAR). Web site: http://www.lrc.ky.gov/Law.htm
For tax years beginning in 2007, is the Kentucky Limited Liability Entity tax (LLET) an add-back to determine Kentucky taxable income?
The tax imposed by KRS 141.0401 is a tax imposed on those entities with limited liability in the state of Kentucky and not an income tax. Therefore, the Limited Liability Entity tax paid is not an add-back to determine Kentucky Taxable income; it is deductible for Kentucky and Federal purposes.
Is there a Kentucky Power-of-Attorney form?
No, there is no Kentucky Power-of-Attorney form; however, Kentucky does accept the Federal Power-of-Attorney form. (Federal Form 2848)
If a Kentucky Form 765, Kentucky Partnership Income and LLET Return is passing a loss to its partners, is a Kentucky Form 740 NP-WH necessary to be filed?
The Kentucky Form 740 NP-WH would not have to be filed.
Could Homeowner’s Associations possibly owe corporation income tax (they are excluded from LLET at this time)?
Yes. It may happen that even though the Association may not owe Federal Corporation Income Tax (Federal form 1120H), the company may owe Kentucky Corporation Income Tax because of the differences between Federal and Kentucky tax law. This is rare, but it could occur.
I am preparing my company’s federal Form 1099 information for the Federal Government. Does Kentucky need the ‘state’ copy of these documents?
At this time the Kentucky Department of Revenue does not require federal Form 1099 ‘state’ copies to be filed for corporation tax purposes. It is recommended that copies be kept in the taxpayers records should the Department need to make a reference to them.
I am preparing my company’s Form 990, Return of Organization Exempt form Income Tax, for the Federal Government (a non-profit/501(c) company). Does Kentucky need a copy of this form sent in for Kentucky reporting purposes?
A copy does not have to be filed with the Kentucky Department of Revenue. However, the Kentucky Attorney General’s office requires a copy of Form 990 to be filed with its office for any non-profits soliciting in the state. (See KRS 367.657)
Does a valid extension stop any interest or penalty for late payment?
No, per KRS 131.180(2) extensions are for filing the return at a later time up to six months, but payments are due on or before the original due date of the taxpayers return.
What are the proper steps in closing a corporation to avoid later problems and billings?
When the return is filed clearly mark the box as a final return. For the return to be accepted as final the corporation should attach a balance sheet reflecting zero assets. The final Corporation Income and Limited Liability Entity taxes must be paid with the return. The corporation must also timely close their account with the Secretary of State by filing Articles of Dissolution.
Are expenses related to nontaxable income deductible in determining Kentucky net income?
No, KRS 141.010(13)(d) states that any deduction allowed under Chapter 1 of the Internal Revenue Code must be reduced by the expenses related to the general stewardship of the assets that produced the non-business or nontaxable income. Actual expenses are preferred, however several approved formulas can be found in Regulation 103 KAR 16:060.
Does a return have to be filed if the business was registered with the Secretary of State for name reservation only?
A name reservation allows a company to pay a fee to reserve a name before starting a business. No legal entity exists at the point that a name reservation is done; therefore, the company is not registered with the Secretary of State or considered to be “doing business” in the state of Kentucky per KRS 141.010(25)(a) and does not need to file a return with the Department of Revenue. If and when a legal entity is incorporated or organized in Kentucky under that reserved name, it will have a filing requirement with the Department of Revenue.
Does a return have to be filed when a business was registered with the Secretary of State for only a week or a month?
Yes, when a company is registered with the Secretary of State, they are considered to be “doing business” in the state of Kentucky per KRS 141.010(25)(a) and are therefore required to file a tax return for the year that the company registers. A foreign corporation registered with the Secretary of State may not be required to file a return if they did not actively conduct any business during the year. The Department of Revenue may ask for a signed statement from a responsible party in the business to confirm no activity in Kentucky during the given tax year. Foreign corporations register because there may be potential for business in the State of Kentucky.
If I’ve already filed a return on the wrong form, does another return need to be filed?
Yes, a taxpayer should file a return on the correct form type and file an Amended return to void the tax return filed on the incorrect form type. Taxes paid with the incorrect form type may be transferred to the correct form type upon written request by the taxpayer.
Can I get a Kentucky account number for a client?
Yes, if a cross-reference (usually a FEIN) is given to establish the caller’s connection to the company. The Department of Revenue is limited on the information that can be given out over the phone because of confidentiality.
||Questions concerning Pass-Through Entities
|Can a pass-through entity file a composite return?
Yes, per KRS 141.206(16)(a), if the shareholders agree to be included in the composite return and have been exempted from nonresident withholding. Estimated payments are required if the tax liability is expected to be $500.00 or more.
What form does a pass-through entity use to file a composite return?
Per KRS141.206(16)(d) a pass-through entity shall deliver to the Department a return upon a form prescribed by the Department. The form to be completed is Kentucky Form 740 NP-WH. 2009 is the first year for the use of Kentucky Form 740 NP-WH as a composite return. Any returns filed on Kentucky Form 740-NP, Kentucky Income Tax Return Non-Resident or Part-Year Resident, will not be accepted.
Are estimated payments required for composite returns?
Yes, the composite return is a return filed on behalf of non resident individual partners, members or shareholders. Per KRS 141.300, if the tax liability can be expected to be over $500 then estimated payments are required. Interest and penalty bills will be issued for underpayment of estimated payments.
||Questions concerning Letters of Good Standing
Can a letter of good standing be issued if there are unpaid tax bills that are in collections control?
Yes, but only if the issues have been resolved and/or a payment agreement has been entered into and verified by a contact in the Department of Revenue’s Division of Collections. A letter can be issued.
Can a letter of good standing be issued if recent tax bills are outstanding?
Yes, if the tax bills are less than 45 days old, a letter can be issued with no qualifications.
Are Limited Liability Companies and/or nonprofit companies required to get letters of good standing from the Division of Unemployment for reinstatement with the Secretary of State?
No. At this time only for-profit corporations are required to get a letter of good standing from both the Department of Revenue and the Division of Unemployment.
Can a letter of good standing be issued if a return that is due has not been filed by a company?
No. If a tax return is delinquent, a letter cannot be issued until the tax return is submitted and the tax liability is paid.
Can a letter of good standing be issued for a Limited Liability Company considered as a disregarded entity for Internal Revenue Services purposes and thus has not filed Kentucky income tax returns; but is included in it’s parent’s filing?
Yes, but the request for the letter must include a statement that the disregarded entity is included in the parent’s filing, and must show the parent’s name and FEIN.
||Questions concerning new companies
I just registered a company with the Kentucky Secretary of State’s Office and need to know how to properly register with the Department of Revenue?
The proper form to use to register a company with the Department of Revenue is Kentucky Form 10A100, Kentucky Tax Registration Application, which can be found and downloaded from the revenue.ky.gov website.
I am an out of state (foreign) corporation that will be doing business in Kentucky, how do I register?
The proper form to use to register a company with the Department of Revenue is Kentucky Form 10A100, which can be found and downloaded from the revenue.ky.gov website. The company is also required to register with the Secretary of State to do business in Kentucky as a foreign corporation.