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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 140. Income Tax Withholding
4/18/2024

23VAC10-140-200. Refund to employer; time limitation; procedure.

A. Adjustments.

1. If an employer pays more than the amount of withholding tax actually withheld for any taxable period, an adjustment should be made on the first return filed after the overpayment is discovered and on each of the following returns for the same calendar year until full credit for the overpayment has been taken. If an employer pays less than the amount of withholding tax actually withheld for any taxable period, an adjustment should be made on the first return filed after the underpayment is discovered. The return on which the overpayment or underpayment is reported must contain a detailed explanation of the adjustment. If the overpayment is discovered on or after filing of the annual return set forth in 23VAC10-140-190 B, a refund is permitted only to the extent that the amount of such overpayment was not deducted and withheld from the employee's wages. If a discovery of an underpayment is made by the Department an assessment can be made within three years from the date on which the tax became due and payable. If no return is filed, an assessment may be made within six years from the date on which the tax became due and payable. (See also 23VAC10-20-100.)

2. If in any calendar year an employer fails to withhold tax, or withholds less than the correct amount of tax from any wage payment, the employer remains liable for the correct amount of withholding tax and may withhold the amount of underwithholding from wages paid during the current calendar year to that employee following discovery of the underwithholding. Reimbursement is a matter for settlement between employer and employee.

3. If in any calendar year the employer deducts more than the correct amount of tax from a wage payment, the employer should repay the overcollection to the employee. The employer should keep employee's written receipt showing the date and amount of the repayment. Every overcollection for which the employee does not give a receipt must be reported and paid with the annual return for the calendar year in which the employer made the overcollection. In the alternative, the employer may reduce subsequent withholding from wage payments made during the current calendar year. If the overcollection is discovered on or after filing of the annual return set forth in 23VAC10-140-190 B, the overcollection must be reported on the employee's written statement required by 23VAC10-140-190 A. Refund is available upon the employee's filing of his income tax return.

B. Unless written application for refund or credit is received by the Commissioner from the employer in accordance with the statute of limitations and procedures of § 58.1-1823 of the Code of Virginia and regulations promulgated thereunder, no refund or credit shall be allowed.

C. Any employer aggrieved by any action of the Commissioner under this section may proceed in court under §§ 58.1-1825 through 58.1-1830 of the Code of Virginia as though the case involved an assessment of income taxes, except that (i) the limitation shall be two years from the date the alleged overpayment was made, and (ii) the time which shall elapse from the filing of the written application with the Commissioner under subsection B to the time when the Commissioner takes final action with respect to such application shall be excluded from the computation of the period of two years.

Statutory Authority

§§ 58.1-203 and 58.1-479 of the Code of Virginia.

Historical Notes

Derived from VR630-6-479, eff. January 1, 1985.

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