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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 112. Declaration of Estimated Income Tax by Individuals
12/31/2024

23VAC10-112-42. Failure by individual to pay estimated tax; period of underpayment.

The period of the underpayment shall run from the date the installment was required to be paid to the earlier of the following dates:

1. May 1, if a calendar year, or the 15th day of the fourth month following the close of the, taxable year, if a fiscal year; or

2. With respect to any portion of the underpayment, the date on which such portion is paid. For purposes of this subdivision, a payment of estimated tax on any installment date shall be considered a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment determined under subdivision 1 of 23VAC10-112-41 for such installment date.

EXAMPLE 1: Taxpayer C filed her return for taxable year 1988 on May 1, 1989, showing a tax liability of $10,000. She had previously paid $1,500 of estimated tax on each of May 1, June 15 and September 15, 1988, and January 15, 1989, and made no other payments before the return was filed. Because each $1,500 payment was less than 90% of $2,500 (one-quarter of the tax shown as due on the return), the addition to the tax applies to each underpayment on each installment date, computed as follows (and assuming an annual interest rate of 12%):

Amount of each underpayment installment:

90% of $2,500 =

$2,250

less installment paid

$1,500

$750

1st installment-period: 5/1/88 to 5/1/89 (12% x 365/365 x $750)

$90

2nd installment-period: 6/15/88 to 5/1/89 (12% x 320/365 x $750)

$78.75

3rd installment-period: 9/15/88 to 5/1/89 (12% x 228/365 x $750)

$56.25

4th installment-period: 1/15/89 to 5/1/89 (12% x 106/365 x $750)

$26.25

Total addition to tax

$251.25

EXAMPLE 2: Taxpayer had a total tax liability of $5,000, 90% (or $4,500) of which would be due in quarterly installments of $1,125 each. He made payments as follows: $200 on May 1, $800 on June 15, $3,000 on September 15 and $0 on January 15. The $1,875 overpayment from September 15 would be applied to the other quarterly underpayments in the following order and amounts: $925 to May 1, $325 to June 15, and $625 to January 15.

Statutory Authority

§§ 58.1-203 and 58.1-492 of the Code of Virginia.

Historical Notes

Derived from VR630-2-492 § 3; adopted September 19, 1984, eff. January 1, 1985; amended, eff. February 1, 1989.

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