State & Local Tax Impacts of COVID-19 for Kentucky – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: May 05, 2021

Information current as of April 7, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Kentucky

  • Kentucky legislation conforms to federal law by allowing a deduction for expenses paid using Paycheck Protection Program loan proceeds, against a business’s Kentucky state income tax.
    • Kentucky H.B. 278, effective March 15, 2021.
  • Kentucky announced the filing and payment deadline for 2020 individual income tax returns is extended to May 17 from April 15. The DOR also provides that 1) penalties and interest will begin to accrue on any remaining unpaid balances as of May 17; 2) this extension doesn’t apply to the April 15 deadline for 2021 estimated tax payments; and 3) individual taxpayers who need additional time to file beyond the May 17 deadline may request a filing extension until October 15 by filing Form 740EXT.
    • Kentucky DOR, News Release; March 18, 2021.
  • Kentucky clarified that all unemployment compensation received by personal income taxpayers is fully taxable by Kentucky. The American Rescue Plan Act of 2021 (ARPA) added an exclusion from federal gross income for 2020 unemployment compensation. Taxpayers can exclude up to $10,200 of 2020 unemployment benefits from federal individual income tax if the taxpayer’s adjusted gross income (AGI) for the tax year is less than $150,000. Married taxpayers filing jointly can exclude $10,200 for each spouse. The Kentucky conformity date to the IRC for computing personal income tax liability doesn’t adopt the ARPA exclusion. If future Kentucky legislation doesn’t adopt the exclusion, taxpayers who file a 2020 state return must add back the amount of unemployment compensation excluded from federal AGI.
    • Kentucky DOR, News Release; April 1, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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