Local service guide
Tax Preparation and Accounting in Lexington, KY
For Tax Preparation and Accounting in Lexington, choose a provider who names the federal, Kentucky, city and school filings included in your engagement. Lexington requires annual net-profit returns from business entities, including sole proprietors, unless they have an IRS tax-exempt determination letter; Fayette County Public Schools administers a separate occupational tax. Request a written scope covering applicable returns, bookkeeping cleanup, payroll, payment instructions and follow-up support before comparing fees. [1] [3]
Define the work before comparing quotes
Request an itemized engagement proposal. Separate annual tax preparation from monthly bookkeeping, payroll administration, cleanup of prior records and help with tax notices. Ask the provider to identify the tax year, business entity and jurisdictions covered. If you also need an owner’s personal return, specify whether the accountant will prepare it under the same agreement.
Give each candidate the same description of your records: bank and credit-card accounts, employees, contractors, business locations and missing reconciliations. Request a separate cleanup estimate and an approval point before extra work starts. Ask whether the provider charges a fixed fee or bills for time, and how changes to the scope affect the bill.
Request written quotes for accounting services, and budget separately for taxes and business license fees. Have each provider explain exclusions, payment terms and charges for work discovered after reviewing your records.
Include the city and school accounts
Lexington assesses a 2.25% occupational license fee on individual compensation and business net profits. The city requires an initial occupational license before a person or entity starts business in Lexington-Fayette County. Ask a prospective accountant to review your account registration and identify the city returns included in the engagement. [1] [2]
Fayette County Public Schools levies a separate 0.5% occupational tax. Its compensation tax applies to Fayette County residents for activities performed in the county; its net-profit tax covers business, professional or occupational activities conducted in the county. Give the accountant your residence and work-location information so they can assess the applicable treatment. [3]
Request distinct filing and payment instructions for the two authorities. Lexington offers an online occupational-tax filing portal. The school tax office says taxpayers cannot pay net-profit returns, extensions or estimated net-profit payments online. Confirm the school payment arrangements before signing an engagement that assumes all local payments use one portal. [1] [3]
Choose support for payroll and recurring filings
If you employ people working in Lexington, assign responsibility for city withholding returns and annual reconciliation. The city requires employer withholding returns quarterly, with monthly filing when total withholding in a quarter exceeds $300. Have the provider state whether monitoring that threshold forms part of payroll support. [1]
Discuss contractor reporting as a separate task. Lexington requires a Statement of Non-Employee Compensation from persons making federal Form 1099 non-employee compensation payments to natural persons for services performed within Lexington-Fayette County. Agree on who collects the records and prepares the applicable local submission. [1]
For continuing bookkeeping, agree on a monthly close date, the reports you will receive and how you will answer transaction questions. Name the person responsible for resolving missing receipts and unexplained balances. Request a handover plan for accounting files, account access and unfinished work if you change providers.
Verify credentials and agree on delivery
The Kentucky Board of Accountancy regulates CPAs and CPA firms and provides separate individual and firm license searches. Use both searches when evaluating a CPA practice. The Board states that even-numbered individual licenses and all firm licenses that holders did not renew by September 1, 2026 expired. Check current status rather than relying on an old certificate. [4]
Ask who prepares your work, who reviews it and who answers questions after filing. Request experience relevant to your entity and records, such as owner-operated businesses, rental records or payroll. Agree on a secure document exchange method and a deadline for supplying complete records.
Before approving returns, request copies and an explanation of the amounts due to each authority. If the accountant proposes a Lexington net-profit extension using an accepted federal extension form, the city requires the local account number, receipt by the original due date and payment of the reasonably estimated amount due. Include those responsibilities in the delivery plan. [2]
Published local occupational tax rates
Local details that affect your job
Low receipts do not remove the city filing requirement
Lexington lists a $100 initial license fee and a $100 annual minimum license fee. Individuals and sole proprietorships reporting gross receipts of $4,400 or less qualify for the stated minimum-fee exemption for the current or subsequent tax year, but must still file the Net Profits License Fee Return. Ask the preparer to assess the exemption and retain the filing in the scope. [1]
School tax payments need their own arrangements
FCPS does not accept online payment of net-profit occupational tax returns, extensions or estimates. For permitted online payroll-withholding or statement-tax payments, the office requires taxpayers to send the return or bill afterward so staff can credit the correct account. Ask the accountant to document both payment and submission. [3]
Some federal employees must handle school tax themselves
FCPS says certain federal agencies do not withhold its occupational tax. Affected employees must obtain an FCPS account number, remit quarterly using Form 220-221-S and file Form 222-S with a W-2 copy. If this applies to an owner or household member whose return you include in the engagement, request this work by name. [3]
Match the engagement to your situation
| Your situation | Work to discuss | Point to confirm |
|---|---|---|
| Sole proprietor with low receipts | City net-profit return and minimum-fee exemption review | The $4,400 gross-receipts exemption does not remove the filing requirement. |
| Business conducting activities in Fayette County | City and FCPS occupational-tax review | List the two authorities and applicable returns separately. |
| Employer with Lexington workers | Withholding returns and annual reconciliation | Assign responsibility for monthly city filing when quarterly withholding exceeds $300. |
| Business with unreconciled records | Cleanup followed by tax preparation | Approve the cleanup scope and extra charges before work starts. |
| Hiring a CPA practice | Individual and firm credential checks | Confirm current status through both Board searches. |
Your hiring checklist
- List the business entity, tax year, work locations and owner residence information.
- Gather prior returns, local account numbers, notices and payment records.
- Prepare bank statements, reconciliations, payroll records and contractor payment records.
- Request an itemized scope for preparation, cleanup, recurring work and notice support.
- Agree on document deadlines, review dates and responsibility for payments.
- Request copies of completed returns and filing acknowledgments.
- Record who retains accounting files and how you can obtain them.
Frequently Asked Questions
Does a federal and Kentucky tax package include local returns?
Ask the provider to confirm this in writing. Lexington requires annual business net-profit returns, subject to its stated tax-exempt exception, and FCPS administers a separate occupational tax. Name applicable local returns in the agreement. [1] [3]
Do I need a city return if my sole proprietorship had little revenue?
Lexington says individuals and sole proprietorships reporting gross receipts of $4,400 or less can qualify for its minimum-license-fee exemption, but must still file the Net Profits License Fee Return. [1]
Can my accountant use a federal extension for Lexington?
The city accepts copies of specified federal extension forms instead of its Form 228-EXT. The request must include the local account number, arrive by the original due date and include the reasonably estimated amount due. Confirm who handles submission and payment. [2]
How should I compare accounting fees?
Give candidates the same records summary and request the same deliverables. Compare preparation, cleanup, payroll, local filings and follow-up support as separate items. Ask each provider to explain exclusions and when they require approval for additional charges.
Sources and scope
This guide combines the sources below with practical planning guidance. Figures apply to the stated geography and period; request a written quote for your property.