If a business has employees, an occupational withholding fee of 2% must be withheld by the employer from all employees’ gross wages earned for work or services performed in the city limits of Berea and remitted to the City. The employee tax applies even if the employee does not reside inside the City limits; it is based on where the work is performed, not on residency or the location of the employer.
Employers with 50 or more employees must submit the employee withholdings along with the Return of License Fee Withheld form on a monthly basis and is due to the City by the 15th day of the month succeeding the deduction.
Employers with fewer than 50 employees must submit the employee withholdings along with the Return of License Fee Withheld form on a quarterly basis and is due to the City before the last day of the next month following the quarter of the deduction.
Annually, each employer must also file an Annual Reconciliation of Occupational License Tax on payroll and submit a copy of all W-2s issued and totals page form W-3. In lieu of copies of W-2s, a payroll listing that shows each employee’s gross wages and occupational tax withheld may be submitted along with a copy of form W-3. The Annual Reconciliation is due to the city by the last day in February.
Any employer who employs contract labor and does not withhold license fees must furnish a copy of Federal Form 1099-Misc to the Finance Department by February 28 of each year. If the business is physically located in Berea, please submit all 1099’s issued. If the business is not physically located in Berea, you may submit only the 1099’s for work physically performed in Berea.
For more information, please call the Finance Office at (859) 986-7218.
Federal Employees
In Kentucky, federal employees working in the City of Berea are subject to a local occupational license fee of 2% of their gross wages less retirement contributions. The federal government, including the United States Postal Service and Veterans Administration, is generally not required to withhold the occupational license fee from their employees’ paychecks unless a jurisdiction employs a minimum number of individuals. Unfortunately, the City of Berea does not have enough federal employees to enable withholding. This means that Federal employees in Berea who are subject to the occupational license fee must file and pay the fee themselves directly to the local government, rather than having it withheld by their employer. Federal employees are encouraged to make quarterly estimated payments to lessen the burden at the end of the year.
However, because there are enough federal employees county-wide, local taxes in can be withheld at a rate of 1% for certain federal employees and remitted to Madison County. In such cases, these employees are only responsible for paying the additional 1% occupational license fee directly to the City of Berea. An employee can determine if there are local wages being withheld by reviewing their pay stub or Box 19 of their IRS W-2 form.
For additional information, please contact Berea’s Tax Administrator at aholmes@bereaky.gov.