Virginia Interest Rates Remain the Same

Virginia Tax announces that Virginia's interest rates will stay the same for the first quarter of 2020. The underpayment and overpayment rates for Virginia taxes are 2% higher than the corresponding federal rates. Federal rates for the first quarter of 2020 will also remain at 5% for tax underpayments and 5% for tax overpayments by taxpayers other than corporations. Accordingly, the Virginia rates for the first quarter of 2020 will be 7% for tax underpayments (assessments) and 7% for tax overpayments (refunds).

Details about these interest rates can be found in Tax Bulletin 19-10 and in the Laws, Rules, and Decisions section of our website.  

View the Tax Bulletin

If you have additional questions, go to www.tax.virginia.gov, or contact us at 804.367.8031 for individual income tax questions and 804.367.8037 for business tax questions.

Important Information Regarding Virginia's Overall Limit on Itemized Deductions: Indexed Amounts of the Limitation for Taxable Year 2019

Virginia Tax is announcing the reinstatement of the Pease Limitation for Virginia income tax purposes, meaning the overall limit on itemized deductions is back in effect beginning with Taxable Year 2019.

This is due to legislation enacted by the Virginia General Assembly deconforming from the provision of the federal Tax Cuts and Jobs Act (TCJA) that suspended the limitation. 

For Taxable Year 2019, the amounts of the Virginia-specific Pease limitation amounts are:

• $326,050 if married filing jointly or a qualifying widow(er);
• $298,850 if a head of household;
• $271,700 if single; and
• $163,025 if married filing separately.

Details can be found in Tax Bulletin 19-9 and in the Laws, Rules, and Decisions section of our website. 

 View the Tax Bulletin

If you have additional questions, go to www.tax.virginia.gov, or contact us at 804.367.8031 for individual income tax questions and 804.367.8037 for business tax questions.

Important Information Regarding Virginia Fiduciary Income Tax Returns: Return Filing and Other Requirements Applicable to Virginia's Revised Definition of Resident Estate or Trust

Virginia Tax is announcing a revision to the definition of “resident estate or trust.” Under legislation enacted by the 2019 General Assembly, an estate or trust is no longer considered a resident estate or trust for Virginia income tax purposes on or after July 1, 2019, solely because it is being administered in Virginia.

Therefore, unless an estate or trust administered in Virginia also meets one of the three remaining criteria, it’s considered a nonresident estate or trust for Virginia income tax purposes. The criteria include:

• The estate of a decedent who at the time of death was domiciled in Virginia;
• A trust created by the will of a decedent who at the time of death was domiciled in Virginia; or
• A trust created by or consisting of property of a person domiciled in Virginia.

All resident estates and trusts that are required to file a federal fiduciary income tax return or that have any Virginia taxable income for the taxable year are required to file an income tax return in Virginia. A nonresident estate or trust is not required to file an income tax return in Virginia unless it is required to file a federal fiduciary income tax return and had Virginia source income.

For taxable years beginning on or after July 1, 2019, the new definition of “resident estate or trust” will be in effect for the entire taxable year. A taxpayer should use the new definition contained in this legislation to determine if it was a “resident estate or trust” for such taxable years. For taxable years ending on or before June 30, 2019, the new definition of “resident estate or trust” does not apply.

However, for many taxpayers this new definition became effective during the midst of their taxable year. For these taxpayers, the new definition will only apply to the portion of their taxable year that occurs on or after July 1, 2019. The old definition will apply to the portion of their taxable year that occurred prior to July 1, 2019.

Details can be found in Tax Bulletin 19-7 and in the Laws, Rules, and Decisions section of our website. 

 View the Tax Bulletin

Virginia Tax announces that Virginia's interest rates will stay the same for the fourth quarter of 2019. The underpayment and overpayment rates for Virginia taxes are 2% higher than the corresponding federal rates. Federal rates for the fourth quarter of 2019 will also remain at 5% for tax underpayments and 5% for tax overpayments by taxpayers other than corporations. Accordingly, the Virginia rates for the fourth quarter of 2019 will be 7% for tax underpayments (assessments) and 7% for tax overpayments (refunds).

Details about these interest rates can be found in Tax Bulletin 19-6 and in the Laws, Rules, and Decisions section of our website.

View the Tax Bulletin

If you have additional questions, go to www.tax.virginia.gov, or contact us at 804.367.8031 for individual income tax questions and 804.367.8037 for business tax questions.

Federal Rates Remain Unchanged: State and certain local interest rates are subject to change every quarter due to changes in federal rates established pursuant to Internal Revenue Code (“IRC”) § 6621. IRC § 6621 dictates that the federal underpayment and overpayment rates are three percentage points higher than the federal short‐term rate. Federal rates for the second quarter of 2019 will be 6% for tax underpayments (assessments) and 6% for tax overpayments (refunds) by noncorporate taxpayers.

Virginia Code § 58.1‐15 provides that the underpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate and the overpayment rate for Virginia taxes will be 2% higher than the federal overpayment rate for noncorporate taxpayers. Accordingly, the Virginia rates for the second quarter of 2019 will be 8% for tax underpayments (assessments) and 8% for tax overpayments (refunds).

Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on March 31, 2019: For the purpose of computing the addition to the tax for underpayment of Virginia estimated income taxes on Form 500C (for corporations), Form 760C (for individuals, estates, and trusts), or Form 760F (for farmers and fishermen), the second quarter 8% underpayment rate will apply through the due date of the return, July 15, 2019.

Reduced Rate for Certain Assessments in Dispute

For administrative appeals filed with the Department of Taxation on or after July 1, 2011, a reduced interest rate equal to the federal short term rate established pursuant to IRC § 6621(b) applies, beginning nine months after the date of assessment until a determination is issued. The federal short‐term rate established pursuant to IRC § 6621(b) for the second quarter of 2019, rounded to the nearest whole percent, is 3%. Accordingly, the reduced rate for the second quarter of 2019 for qualifying assessments in dispute is 3%.

Local Tax

Assessments: Localities that assess interest on delinquent taxes under Va. Code § 58.1‐3916 may impose interest at a rate not to exceed 10% for the first year of delinquency, and at a rate not to exceed 10% or the federal underpayment rate in effect for the applicable quarter, whichever is greater, for the second and subsequent years of delinquency. For the second quarter of 2019, the federal underpayment rate is 6%.

Refunds: Localities that charge interest on delinquent taxes are required to pay interest to taxpayers on all overpayments or erroneously assessed taxes at the same rate as they charge interest on delinquent taxes under Va. Code § 58.1‐3916. Click here to read the full bulletin for the recent interest rates. 

Additional Information: This Tax Bulletin, along with other reference documents, is available online in the Laws, Rules and Decisions section of the Department’s website, located at www.tax.virginia.gov. If you have questions about interest rates, please visit Virginia Tax’s website or contact the Department at 804.367.8031 (for individuals), 804.786.2450 (for Soft Drink Excise Tax and Aircraft Sales and Use Tax), or 804.367.8037 (for all other business taxes).

In response to Internal Revenue Service (“IRS”) Notice 2019‐17, Tax Commissioner Craig M. Burns announced relief from the estimated tax underpayment penalty for farmers, fishermen, and merchant seamen unable to file and pay their 2018 taxes by the March 1 deadline. Virginia will also allow these individuals additional time to file and pay their taxes. Farmers, fishermen, and merchant seamen will be provided relief from the estimated tax underpayment penalty provided a return is filed and payment of the entire tax due is made by April 15, 2019.

Due to certain changes in the rules that affect farmers and fishermen, the United States Treasury Department and IRS anticipate that farmers and fishermen may not be able to accurately determine and pay their tax liability by the March 1 deadline. Accordingly, the IRS is providing relief to certain individual taxpayers who are farmers or fishermen by waiving penalties related to estimated tax payments.

Under Virginia law, farmers, fishermen, and merchant seamen with two‐thirds of their estimated Virginia gross income from self‐employed farming, fishing or being a merchant seaman have special filing requirements. These individuals do not make quarterly estimated tax payments and are not subject to an estimated tax underpayment penalty provided their return is filed by March 1 and the entire tax is paid at that time.

In order to receive an automatic waiver of the estimated tax underpayment penalty, farmers, fishermen and merchant seamen need only to file their returns and pay the entire tax due by April 15, 2019. No special action is required. If you have additional questions, please visit our website at http://www.tax.virginia.gov or contact us at (804) 367‐8031.

On December 31, 2018, Congress enacted the Veterans Benefits and Transition Act of 2018. This federal legislation amends the Servicemember Civil Relief Act to allow spouses of a servicemember to use the same residence for state tax purposes as that of the servicemember.

The Veterans Benefits and Transition Act allows qualifying spouses to elect the same residency as the servicemember for state tax purposes, even if the spouse has a different residency from that of the servicemember. This election can be made annually beginning with Taxable Year 2018, regardless of the date on which the marriage of the spouse and the servicemember occurred.

Tax Bulletin 19-2 details how the changes affect 2018 Virginia income tax returns.

View the Tax Bulletin

If you have additional questions, please visit our website at www.tax.virginia.gov, or contact us at 804.367.8031 for individual income tax questions.

Under emergency legislation enacted by the 2019 General Assembly on February 15, 2019, Virginia's date of conformity to the terms of the Internal Revenue Code will advance from February 9, 2018, to December 31, 2018.

The new legislation allows Virginia to generally conform to the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018 for Taxable Year 2018 and after. It also includes Virginia income tax law changes that may affect business taxpayers filing income tax returns for Taxable Year 2018 and after.

In addition, this legislation provides a refund of up to $110 for an individual or $220 for married persons filing a joint return. In order to receive a refund, taxpayers need to file a complete return for Taxable Year 2018 before July 1, 2019. A refund is allowed up to the amount of a taxpayer’s tax liability after the application of any deductions, subtractions, or credits to which the individual or married persons are otherwise entitled. Such refunds are required to be issued on or after October 1, 2019, but before October 15, 2019.

This legislation also includes Virginia income tax law changes that may affect individual taxpayers filing income tax returns for Taxable Year 2019 and after. We will publish additional guidance regarding such provisions soon.

Tax Bulletin 19-1 details the conformity adjustments that may be necessary and provides more information on how the changes affect 2018 Virginia income tax returns.

View the Tax Bulletin

Additionally, Virginia will continue to deconform from:

• Bonus depreciation allowed for certain assets under federal income taxation;
• Five-year carry back of certain net operating losses (“NOLs”) generated in Taxable Years 2008 and 2009;
• Tax exclusions related to cancellation of debt income; and
• Tax deductions related to the application of the applicable high yield debt obligation rules.

If you have additional questions, please visit our website at www.tax.virginia.gov, or contact us at 804.367.8031 for individual income tax questions and 804.367.8037 for business tax questions.

On February 15, the Governor signed legislation conforming Virginia’s tax laws to the federal Tax Cuts and Jobs Act. We are now able to prepare our systems to begin processing 2018 returns, and will start processing over Presidents’ Day weekend.

All 2018 tax forms and instructions are now available on our website.

As you know, our systems process returns in the order we receive them – first in/first out.

Once we process a taxpayer’s return, they can use the Where’s My Refund web app to get up-to-date information about their return status.

As you’d expect, we already have a significant backlog of returns, so taxpayers will experience slower turnaround times for refunds than they’re accustomed to until we have worked through the backlog.

We appreciate your help in ensuring that the taxpayer’s address is correct whether they’re filing electronically or on paper.

Please see the Tax Bulletin distributed earlier today for details about the legislation.

For Immediate Release
Date: 01/25/2019
Contact: Stephanie M. Benson , Communications Specialist , 804.404.4109 , stephanie.benson@tax.virginia.gov

New for Taxpayers: Virginia Tax Accepting, Not Processing Returns
~Individual Income Tax Filing Season Opens on Jan. 28, 2019~

RICHMOND, Va. – There is one big difference to individual income tax filing in Virginia this year. Although people can start filing their individual income taxes on Monday, Jan. 28, 2019, Virginia Tax will not be able to start processing returns immediately, as the Virginia General Assembly determines the commonwealth’s response to the federal Tax Cuts and Jobs Act.

“We’re committed to providing the information necessary to help everyone properly prepare and file this tax season,” said Tax Commissioner Craig M. Burns. “We also want to ensure that returns are processed accurately in as timely a manner as possible.”

While we are waiting to start processing returns, taxpayers will not have access to refund information using the Where’s My Refund application on the Virginia Tax website. If taxpayers file electronically and receive a message that Virginia Tax has accepted the return, no more action is necessary at this time.

Last year, Virginia Tax processed more than 4.2 million individual income tax returns with 83 percent of people filing electronically. You’re encouraged to again file electronically this year and request a refund, if you have one coming, via direct deposit. The filing deadline for most people is Wednesday, May 1, 2019.

For additional information about filing season, including tips to reduce the chance your return is stopped for review, go to www.tax.virginia.gov.