Administrative Code

Virginia Administrative Code
5/22/2024

Chapter 140. Income Tax Withholding

23VAC10-140-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Commissioner" means the Tax Commissioner.

"Employee" means "employee'' as defined in § 58.1-460 of the Code of Virginia. The relationship of employer and employee is determined in accordance with the test set forth in 26 CFR 31.3401(c)-1.

"Wages" means "wages'' as defined in § 58.1-460 of the Code of Virginia. The exclusion from wages of a payment does not exempt the payee from income tax liability for the payment. However, the payee and the payor may agree pursuant to § 58.1-466 of the Code of Virginia to have amounts withheld from payments that are not considered wages. A payor who voluntarily withholds income tax consents to be treated as an employer making payment of wages subject to Article 16 (§ 58.1-460 et seq.) of Chapter 3 of Title 58.1 of the Code of Virginia and this chapter.

Statutory Authority

§ 58.1-203 of the Code of Virginia.

Historical Notes

Derived from VR630-6-460, eff. January 1, 1985; amended, Virginia Register Volume 33, Issue 7, eff. February 13, 2017.

23VAC10-140-20. (Repealed.)

Historical Notes

Derived from VR630-6-461 and VR630-4-462, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-140-40. Other methods of withholding.

The Commissioner may grant permission to employers who do not desire to use the withholding tax tables provided in accordance with 23VAC10-140-30, to determine the amount of tax to be withheld by use of a method of withholding other than withholding tax tables, provided such method will withhold from each employee substantially the same amount of tax as would be withheld by use of the withholding tax tables. Employers who desire to determine the amount of tax to be withheld by a method other than by use of the withholding tax tables shall obtain permission from the Commissioner before the beginning of a payroll period for which the employer desires to withhold the tax by such other method. Applications to use such other method must be accompanied by evidence establishing the need for the use of such method.

The following formula has been approved for computing the amount of Virginia income tax to be withheld by employers who process their payrolls on electronic data processing equipment:

Legend

G = Gross pay for pay period

P = Pay periods per year

E = Total personal exemptions claimed on VA-4

A = Annualized taxable income

T = Tax to be withheld for pay period

W = Annualized tax to be withheld

Pay Period Conversion (P)

Annually

= 1

Semi-Monthly

= 24

Semi-Annually

= 2

Bi-Weekly

= 26

Quarterly

= 4

Weekly

= 52

Monthly

= 12

Daily

= 300

Formula

1. A = (G)P - [$650 + (600)E]

2. If A is:

W is:

Not over $3,000

2% of A

Over

But not
over

of excess
over

$ 3,000

$ 5,000

$ 60 + 3%

$ 3,000

$ 5,000

$12,000

$120 + 5%

$ 5,000

$12,000

...

$470 + 5 3/4%

$12,000

3. T = W / P

Example: John Q. Taxpayer claims his wife and three children for Virginia withholding purposes. He had $400 in gross wages for the SEMI-MONTHLY pay period.

1.

A = (G)P - [$650 + (600)E]

A = (400) 24 - [650 + (600)5]

A = 9,600 - (650 + 3,000)

A = 9,600 - 3,650 = 5,950

2.

W = 167.50

3.

W / P = T

167.50/24 = 6.98

$6.98

=

T

= tax to be withheld for pay period

Statutory Authority

§§ 58.1-203 and 58.1-463 of the Code of Virginia.

Historical Notes

Derived from VR630-6-463, eff. January 1, 1985.

23VAC10-140-50. Miscellaneous payroll period applicable to withholding in payment of certain wages; withholding on basis of average wages.

A. Wages paid with respect to period which is not payroll period.—If wages are paid with respect to a period which is not a payroll period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days, including Sundays and holidays, equal to the number of days in the period with respect to which such wages are paid.

Example: Employer B is a painter who pays Employee C when a particular job is completed. Painting Ms. R's house took six days over an eight-day period. Employee C (who claims two personal exemptions) earned $75 for each of the six days worked, or $450 for the job. For withholding purposes, Employee C is deemed to have earned $56.25 ($450 divided by eight) for each day in the eight-day period. Using the daily or miscellaneous withholding tax table, $17.76 (or $2.22 for each of the eight days) of Virginia income tax was withheld.

B. Wages paid without regard to any period.—In any case in which wages are paid by an employer without regard to any payroll period or other period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days equal to the number of days, including Sundays and holidays, which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or the date of commencement of employment with such employer during such year, or January 1 of such year, whichever is the later.

Example: Employer D is an automobile dealer who pays Employee E a commission when he sells automobiles. Employee E received commissions on March 30, 1983 and May 17, 1983 for several cars sold in 1983. The May 17 commission was $3,000. Employee E, who has been employed since June 15, 1982, claims two personal exemptions. Employer D withheld $123.36 from the May 17 commission, computed as follows:

1. Average daily wage is computed by dividing total amount of wage payment ($3,000) by number of days since March 30, 1983 (48 days) [March 30, 1983 is used as the starting date because it is the later of March 30, 1983, June 15, 1982 or January 1, 1983]. . . . . . . . $62.50

2. Amount of withholding from daily or miscellaneous table on wages of $62.50 for two exemptions ($2.57) multiplied by 48 days. . . $123.36

C. Withholding on basis of average wages.—An employer may determine the amount of tax to be deducted and withheld upon a payment of wages to an employee on the basis of the employee's average estimated wages, with necessary adjustments, for any quarter.

Statutory Authority

§§ 58.1-203 and 58.1-464 of the Code of Virginia.

Historical Notes

Derived from VR630-6-464, eff. January 1, 1985.

23VAC10-140-60. Overlapping pay periods, and payment by agent or fiduciary.

A. Supplemental wage payments.

1. An employee's remuneration may consist of wages paid for a payroll period and supplemental wages, such as bonuses, commissions, and overtime pay, paid for the same or a different period, or without regard to a particular period. When such supplemental wages are paid (whether or not at the same time as the regular wages), the amount of the tax required to be withheld under these regulations shall be determined in accordance with this section.

2. The supplemental wages, if paid concurrently with wages for a payroll period, shall be aggregated with the wages paid for such payroll period. If not paid concurrently, the supplemental wages shall be aggregated with the wages paid or to be paid within the same calendar year for the last preceding payroll period or for the current payroll period. The amount of tax to be withheld shall be determined as if the aggregate of the supplemental wages and the regular wages constituted a single wage payment for the regular payroll period.

Example 1: A is employed as a salesman at a monthly salary of $130 plus commissions on sales made during the month. He claims one withholding exemption. During May 1982, A earns $300 in commissions, which together with the salary of $130 is paid on June 10, 1982. Under the wage bracket method the amount of the tax required to be withheld is shown in the table applicable to a monthly payroll period. Under this table $7.42 in tax is required to be withheld from wages of $430 with one personal exemption claimed.

Example 2: B is employed at an annual salary of $12,000 which is paid semimonthly in the amount of $500 on the 15th day and on the last day of each month. He also receives a bonus and commission determined at the end of each 3-month period. The bonus and commission for the 3-month period ending on September 30, 1982, amount to $250, which is paid on October 10, 1982. B has claimed four withholding exemptions. Under the wage bracket method, the amount of tax required to be withheld on $750, which is the aggregate of the $250 bonus and the last preceding semimonthly wage payment of $500 (which was paid September 30, 1982), is shown in the table applicable to a semimonthly payroll period to be $27.29. However, since tax in the amount of $13.60 was withheld on the (September 30, 1982) semimonthly wage payment of $500, the amount to be withheld on October 10, 1982, is $13.69 ($27.29 less $13.60).

If, however, supplemental wages are paid and tax has been withheld from the employee's regular wages, the employer may determine the tax to be withheld by using a flat percentage rate of 5.75%, without allowance for exemption and without reference to any regular payment of wages.

B. Vacation allowances. Amounts of so-called "vacation allowances" shall be subject to withholding as though they were regular wage payments made for the period covered by the vacation. If the vacation allowance is paid in addition to the regular wage payment for such period, the rules applicable with respect to supplemental wage payments shall apply to such vacation allowance.

C. Payroll period of more than one year. If wages are paid to an employee for a payroll period of more than one year, for the purpose of determining the amount of tax required to be deducted and withheld in respect of such wages the amount of the tax shall be determined as if such payroll period constituted a miscellaneous payroll period of 365 days.

D. Payment by agent or fiduciary. If a payment of wages is made to an employee by an employer through an agent, fiduciary, or other person who also has the control, receipt, custody, or disposal of, or pays the wages payable by another employer to such employee, the amount of the tax required to be withheld on each wage payment made through such agent, fiduciary, or person shall, whether the wages are paid separately on behalf of each employer or paid in a lump sum on behalf of all such employers, be determined upon the aggregate amount of such wage payment or payments in the same manner as if such aggregate amount had been paid by one employer. Hence, the tax shall be determined upon the aggregate amount of the wage payment. In any such case, each employer shall be liable for the return and payment of a pro rata portion of the tax so determined, such portion to be determined in the ratio which the amount contributed by the particular employer bears to the aggregate of such wages.

Example: Three companies maintain a central management agency which carries on the administrative work of the several companies. The central agency organization consists of a staff of clerks, bookkeepers, stenographers, etc., who are the common employees of the three companies. The expenses of the central agency, including wages paid to the foregoing employees, are borne by the several companies in certain agreed proportions. Company X pays 45%, Company Y pays 35% and Company Z pays 20% of such expenses. The amount of the tax required to be withheld on the wages paid to persons employed in the central agency should be determined in accordance with the provisions of this section. In such event, Company X is liable as an employer for the return and payment of 45% of the tax required to be withheld, Company Y is liable for the return and payment of 35% of the tax and Company Z is liable for the return and payment of 20% of the tax.

Statutory Authority

§§ 58.1-203 and 58.1-465 of the Code of Virginia.

Historical Notes

Derived from VR630-6-465, eff. January 1, 1985.

23VAC10-140-70. Additional withholding.

A. In addition to the tax required to be deducted and withheld in accordance with the provisions of this chapter, the employer and employee may agree that an additional amount of Virginia income tax shall be withheld from the employee's wages. The agreement shall be in writing and shall be in such form as the employer may prescribe. The agreement shall be effective for such period as the employer and employee mutually agree upon. However, unless the agreement provides for an earlier termination, either the employer, or the employee, by furnishing a written notice to the other, may terminate the agreement effective with respect to the first payment of wages made on or after the first status determination date, January 1 or July 1, which occurs at least 30 days after the date on which such notice is furnished.

B. The amount deducted and withheld pursuant to an agreement between the employer and employee shall be set forth on the Employee's Withholding Exemption Certificate (currently Form VA-4) and shall be considered as tax required to be deducted and withheld under this chapter. All provisions of law and regulations applicable with respect to the tax required to be deducted and withheld under these regulations shall be applicable with respect to any amount deducted and withheld pursuant to the agreement.

Statutory Authority

§§ 58.1-203 and 58.1-466 of the Code of Virginia.

Historical Notes

Derived from VR630-6-466, eff. January 1, 1985.

23VAC10-140-80. (Repealed.)

Historical Notes

Derived from VR630-6-467 and VR630-6-468, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-140-100. Included and excluded wages.

A. If a portion of the remuneration paid by an employer to his employee for services performed during a payroll period of not more than 31 consecutive days constitutes "wages" under 23VAC10-140-10 (that is, remuneration for services from which tax is required to be withheld), and the remainder does not constitute "wages," all the remuneration paid the employee for services performed during such period shall for purposes of withholding be treated alike, that is, either all included as wages or all excluded. The time during which the employee performs services, the remuneration of which constitutes wages under 23VAC10-140-10, and the time during which the employee performs services, the remuneration for which under such section does not constitute wages, determine whether all the remuneration for services performed during the payroll period shall be deemed to be included or excluded.

B. If ½ or more of the employee's time in the employ of a particular employer in a payroll period is spent in performing services the remuneration for which constitutes wages, then all the remuneration paid the employee for services performed in that payroll period shall be deemed to be wages.

C. If less than ½ of the employee's time in the employ of a particular employer in a payroll period is spent in performing services the remuneration for which constitutes wages, then none of the remuneration paid the employee for services performed in that payroll period shall be deemed to be wages.

D. The application of the provisions of subsections A, B, and C may be illustrated by the following examples:

Example 1: Employer B, who operates a store and a farm, employs A to perform services in connection with both operations. The remuneration paid A for services on the farm is remuneration for agricultural labor and is not subject to withholding, and the remuneration for services performed in the store constitutes wages and is subject to withholding. Employee A is paid on a monthly basis. During a particular month, A works 120 hours on the farm and 80 hours in the store. None of the remuneration paid by B to A for services performed during the month is deemed to be wages, because the remuneration paid for less than ½ of the services performed during the month constitutes wages. During another month, A works 75 hours on the farm and 120 hours in the store. All of the remuneration paid by B to A for services performed during the month is deemed to be wages because the remuneration paid for ½ or more of the services performed during the month constitutes wages.

Example 2: Employee C is employed as a maid by D, a physician, whose home and office are located in the same building. The remuneration paid C for services in the home is remuneration for domestic service and is not subject to withholding, and the remuneration paid for her services in the office constitutes wages and is subject to withholding. C is paid on a weekly basis. During a particular week C works 20 hours in the home and 20 hours in the office. All of the remuneration paid [by] D to C for services performed during that week is deemed to be wages, because the remuneration paid for ½ or more of the services performed during the week constitutes wages. During another week C works 22 hours in the home and 15 hours in the office. None of the remuneration paid by D to C for services performed during that week is deemed to be wages, because the remuneration paid for less than ½ of the services performed during the week constitutes wages.

E. The rules set forth in this section do not apply (1) with respect to any remuneration paid for services performed by an employee for his employer if the periods for which remuneration is paid by the employer vary to the extent that there is no period that constitutes a payroll period within the meaning of 23VAC10-140-10, or (2) with respect to any remuneration paid for services performed by an employee for his employer if the payroll period for which remuneration is paid exceeds 31 consecutive days. In any such case withholding is required with respect to that portion of such remuneration which constitutes wages.

Statutory Authority

§§ 58.1-203 and 58.1-469 of the Code of Virginia.

Historical Notes

Derived from VR630-6-469, eff. January 1, 1985.

23VAC10-140-110. Withholding exemption certificates.

A. Generally. An employee receiving wages shall be entitled to the number of exemptions for which such employee qualifies under the laws of the United States relating to federal income taxes. However, the Commissioner, upon written request, may permit additional allowances where the amount withheld according to the Virginia Income Tax Withholding Tables will result in a substantial overpayment of the employee's income tax. See 23VAC10-140-40.

B. On commencement of employment. At the time of commencing employment, every employee shall furnish his employer with a signed withholding exemption certificate relating to the withholding exemptions which the employee claims, which in no event shall exceed the sum of exemptions to which the employee is entitled. If an employee fails to furnish a certificate, an employer is required to withhold tax as if the employee had claimed no withholding exemptions.

C. When certificate takes effect.

1. First certificate furnished. Withholding exemption certificates shall take effect as of the beginning of the first payroll period ending, or the first payment of wages made without regard to a payroll period, on or after the date on which such certificate is so furnished, provided that certificates furnished before January 1, 1983 shall be considered as furnished on that date.

2. Furnished to take place of existing certificate. A withholding exemption certificate which takes effect under this chapter shall continue in effect with respect to the employer until another such certificate takes effect under this section. If a withholding exemption certificate is furnished to take the place of an existing certificate, the employer, at the employer's option, may continue the old certificate in force with respect to all wages paid on or before the first status determination date, January 1 or July 1, which occurs at least 30 days after the date on which such new certificate is furnished.

D. Change of status which affects next calendar year. If, on any day during the calendar year, the number of withholding exemptions to which the employee will be, or may reasonably be expected to be, entitled at the beginning of his next taxable year is less than the number of exemptions to which the employee is entitled on such day, the employee must, on or before December 1 of the year in which the change occurs, unless such change occurs in December, furnish the employer with a withholding exemption certificate reflecting the decrease in the number of the exemptions which the employee claims with respect to such next taxable year, which shall in no event exceed the sum of exemptions to which the employee will be, or may reasonably be expected to be, so entitled. If the change occurs in December, the new certificate must be furnished within 10 days after the change occurs. The number of withholding exemptions to which an employee is entitled decreases, for example, because of the death of a spouse or dependent of the employee. If, on any day during the calendar year, the number of withholding exemptions to which the employee will be, or may reasonably be expected to be, entitled at the beginning of his next taxable year is greater than the number of withholding exemptions claimed by the employee on a withholding exemption certificate in effect on such day, the employee may, on or before December 1 of the year in which such change occurs, unless such change occurs in December, furnish his employer with a new withholding exemption certificate reflecting the increase in the number of withholding exemptions. If the change occurs in December, the certificate may be furnished on or after the date of which the change occurs. Exemption certificates furnished pursuant to this subsection shall not take effect with respect to any payment of wages made in the calendar year in which the certificate is furnished.

E. Change of status which affects present calendar year. If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is less than the number of withholding exemptions claimed by the employee on his withholding exemption certificate then in effect, the employee shall, within 10 days after the change occurs, furnish the employer with a new withholding exemption certificate relating to the withholding exemptions which the employee then claims, which shall in no event exceed the number of exemptions to which he is entitled on such day. The number of withholding exemptions to which an employee is entitled decreases, for example, for any of the following reasons:

1. The employee's spouse for whom the employee has been claiming a withholding exemption is divorced or legally separated, or claims his own exemption on a separate certificate.

2. The support of a dependent for whom the employee claimed an exemption is assumed by another so that the employee no longer expects to furnish more than half the support for the year.

3. Employee finds that a dependent for whom employee claimed an exemption no longer qualifies because he has gross income of more than $1,000.

If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is greater than the number of withholding exemptions claimed, the employee may furnish the employer with a new withholding exemption certificate relating to the withholding exemptions which the employee then claims, which shall in no event exceed the number of exemptions to which he is entitled on such day.

F. Employee's certificate of exemption from withholding. An employee who has in effect the withholding exemption certificate set forth in 23VAC10-140-20 (the "certificate of exemption from withholding") must revoke such exemption within 10 days from the time he anticipates incurring income tax liability for the year. To revoke such exemption, the employee must furnish his employer a signed withholding exemption certificate as set forth in subsection B above. An employee's certificate of exemption from withholding shall expire on January 1 of the next year unless, before that date, the employee shall have filed with his employer a new certificate of exemption from withholding. An employee shall not file a certificate of exemption from withholding if his joint or separate return shows tax liability before the allowance of any credit for income tax withheld.

G. Form of certificate. Withholding exemption certificates shall be in such form and contain such information as the Commissioner may prescribe.

Statutory Authority

§§ 58.1-203 and 58.1-470 of the Code of Virginia.

Historical Notes

Derived from VR630-6-470, eff. January 1, 1985.

23VAC10-140-120. (Repealed.)

Historical Notes

Repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-140-130. Employer's returns and payments of withheld taxes.

Every employer required to deduct and withhold from an employee's wages under this chapter shall file a return and pay over to the Commissioner on a calendar year basis (without regard to the taxable year of the employer or employee for income tax purposes) the amount required to be withheld hereunder as follows:

1. Quarterly filer—every employer whose monthly liability is less than $100 shall file a return and pay over withheld taxes, on or before April 30 for the first quarter, July 31 for the second quarter, October 31 for the third quarter, and January 31 for the fourth quarter.

2. Monthly filer—every employer whose average monthly liability can reasonably be expected to be $100 or more, shall file a return and pay over withheld taxes monthly, on or before the 20th day of the following month for each month which does not close a quarterly period and, for months that close a quarter (March, June, September and December), on or before the last day of the following month.

3. Quarter-monthly filer—every employer whose average monthly liability can reasonably be expected to be $1,000 or more, shall file a return and pay over withheld taxes as in the preceding paragraph 2. In addition, if on the 7th, 15th, 22nd or last day of any month the aggregate amount required to be withheld exceeds $500, the employer must file a form with the Commissioner within three banking days following the close of such quarter-monthly period and pay the amount so withheld. However, when a quarter-monthly payment is due within three days of the due date for the filing of the monthly returns, the payment must be made with such return. Any employer making payment under this paragraph 3 will be deemed to have met the requirements hereof if at least 90% of actual tax liability for such period is paid. When a quarter-monthly payment is due within three days of the due date for the filing of the quarterly returns, the payment may be made within up to three banking days after the due date for the quarterly returns.

Example: Employer X has a liability of $400 for the quarter-monthly period ending January 7. Because his liability does not exceed $500 no payment is required for that period. His liability for the quarter-monthly period ending January 15 is also $400. Because the accumulated liability for the two quarter-monthly periods ($800) exceeds $500, Employer X must pay $800 within three banking days of January 15.

4. Seasonal filer—employers who operate seasonal businesses may request permission to file returns only for those months in which Virginia income tax is withheld. The request must be in writing and, for employers who qualify, the returns must be filed on or before the 20th day of the following month which does not close a quarterly period and for months that close a quarter (March, June, September and December), on or before the last day of the following month.

The returns and forms filed under this section shall be in such form and contain such information as the Commissioner may prescribe.

Statutory Authority

§§ 58.1-203 and 58.1-472 of the Code of Virginia.

Historical Notes

Derived from VR630-6-472, eff. January 1, 1985.

23VAC10-140-140. (Repealed.)

Historical Notes

Derived from VR630-6-473 to VR630-6-477, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-140-190. Withholding tax statements for employees; employers must file annual returns with commissioner.

A. Every person required to deduct and withhold from an employee's wages under these regulations shall furnish a written statement to each such employee in respect to the remuneration paid by such person to such employee during the calendar year, on or before January 31 of the succeeding year, or if his employment is terminated before the close of such calendar year, on the day on which the last payment of remuneration is made. The statement shall be in duplicate showing the following: (1) the name, address, and state and federal identification numbers of such person; (2) the name of the employee and his social security account number; (3) the total amount of wages; (4) the total amount deducted and withheld under these regulations by such employer; (5) the calendar year for which the wages were paid; and (6) the name of the state for which the tax was withheld. An employee should report any discrepancies in the written statement to the employer. If the employer determines an error has been made, the employer shall promptly issue to the employee an amended written statement and also send a copy of the amended statement to the Department with a written explanation.

B. Every employer shall file an annual return, currently Employer's Annual Reconciliation of Virginia Income Tax Withheld, Form VA-6, with the Commissioner, not later than January 31 of the calendar ear succeeding the calendar year in which wages were withheld from employees, or if the business is terminated during the year, within 30 days after the last month in which wages were paid. Such annual return shall be accompanied by an additional copy of each of the written statements furnished each employee under subsection A of this section, including any amendments thereto, and by an adding machine tape (or some other kind of listing) showing how the total amount of Virginia income tax withheld was computed. Employers who desire permission for magnetic tape reporting should make written request to the Department.

Statutory Authority

§§ 58.1-203 and 58.1-478 of the Code of Virginia.

Historical Notes

Derived from VR630-6-478, eff. January 1, 1985.

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.

23VAC10-140-210. (Repealed.)

Historical Notes

Derived from VR630-6-480 and VR630-6-481, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-140-230. Certain nonresidents; reciprocity with other states.

A. Certain nonresidents. Any employee who lives in Kentucky, Maryland, West Virginia, or the District of Columbia, and commutes each workday from one of the above named jurisdictions to his place of employment in Virginia and derives wages for service performed in Virginia for an employer within the geographical limits of Virginia, is required to file with his Virginia employer a Certificate of Nonresidence in the Commonwealth of Virginia, Form VA-3. The Virginia employer, upon receipt of such properly executed certificate from such an individual, will not withhold any Virginia income tax from such employee's wages.

If a nonresident who has filed such certificate subsequently moves to Virginia at any time during the calendar year, or otherwise loses his status as a commuter on a daily basis from one of the above named jurisdictions to his place of employment in Virginia, he must notify his Virginia employer of such fact within 10 days after the change of status and, in such case, the Virginia employer is required to withhold the full amount of Virginia income tax from the wages of such employee beginning with the first wages paid to such employee after the employer has been notified of the change of status of such employee.

B. Pennsylvania agreement. Under an agreement made pursuant to § 58.1-342 B of the Code of Virginia, Virginia residents are not required to pay income tax or file a return with, nor be subject to withholding on compensation earned from sources in, Pennsylvania. Pennsylvania residents earning wages in Virginia will be similarly exempted from income tax filing, payment, and withholding requirements imposed by Virginia. Nonresidents must file a certificate of nonresidence with their employer in order to relieve them of their tax liability to the state in which they are employed.

The agreement eliminates the previous need to file two returns when a taxpayer resides in one state and works in the other. Now such individuals need only file a tax return with their state of residence. Under the terms of the agreement, Pennsylvania employers not otherwise required to withhold by law will be encouraged to withhold and remit Virginia tax from wages paid to Virginia residents. Virginia employers are likewise encouraged to withhold and remit Pennsylvania tax from wages paid to residents of that state.

The agreement applies only to earned income. It does not apply to individuals who reside in both states for a portion of the year. Such individuals will continue to be liable for tax to each state on income received while residing in the state.

Statutory Authority

§§ 58.1-203 and 58.1-482 of the Code of Virginia.

Historical Notes

Derived from VR630-6-482, eff. January 1, 1985.

23VAC10-140-240. (Repealed.)

Historical Notes

Derived from VR630-6-483 and VR630-6-484, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-140-280. Lottery winnings; definitions.

The following words and terms, when used in 23VAC10-140-280 through 23VAC10-140-284, shall have the following meanings, unless the context clearly indicates otherwise:

"Lottery Department" means the Virginia State Lottery Department.

"Lottery prize" means any single cash or noncash prize awarded by the Lottery Department as a result of winning any authorized lottery game.

"Virginia source income" includes, but is not limited to, (i) items of income, gain, loss, and deduction attributable to ownership of any interest in real or tangible personal property or a business, trade, profession, or occupation carried on in the Commonwealth; (ii) income attributable to intangible personal property, to the extent that such property is employed by the taxpayer in a business, trade, profession, or occupation carried on in the Commonwealth; and (iii) prizes awarded by the Lottery Department.

Statutory Authority

§§ 58.1-203 and 58.1-4006(B)(1) of the Code of Virginia.

Historical Notes

Derived from VR630-6-4006 § 1, eff. November 21, 1990.

23VAC10-140-281. Income taxation of lottery prizes.

A. Lottery prizes subject to taxation. Any lottery prize of $600 or more shall be subject to Virginia income tax. To the extent included in federal adjusted gross income, any lottery prize of less than $600 shall be subtracted from federal adjusted gross income in determining Virginia taxable income. No subtraction is allowed for the first $599 of a prize of $600 or more.

B. Persons subject to taxation. The following persons shall be subject to Virginia income taxation at the current applicable rate as determined in Chapter 3 of Title 58.1 of the Code of Virginia on lottery prizes subject to taxation under subsection A above:

1. Residents;

2. Nonresidents; and

3. Part-year residents.

C. Multiple winners. When a lottery prize is claimed by a group, family unit, club or other organization, the multiple winners will be required to (i) file an Internal Revenue Service Form 5754, "Statement by Person(s) Receiving Gambling Winnings" with the Lottery Department, or (ii) attach a statement to their federal income tax return.

The statement should include the following information for each individual, person, or entity who receives a portion of the lottery prize:

1. The name;

2. Social security number, or employer's federal identification number; and

3. Amount of the winnings each individual person or entity received from the lottery prize.

The amount of the lottery prize included in federal adjusted gross income for each individual person or entity shall be subject to state income taxation. Each individual person's or entity's share of $599 or less shall be subject to state income taxation if the aggregate amount of the prize prior to distribution among the group, family unit, club or organization is $600 or more.

D. Estimated tax. Taxpayers may be required to pay estimated taxes in the event that a lottery prize is not subject to withholding or if withholding is insufficient. In accordance with §§ 58.1-490 through 58.1-496 of the Code of Virginia, estimated tax is due if the estimated tax liability on all income subject to state taxation exceeds a taxpayer's total withholding and other credits by more than $150.

Statutory Authority

§§ 58.1-203 and 58.1-4006(B)(1) of the Code of Virginia.

Historical Notes

Derived from VR630-6-4006 § 2, eff. November 21, 1990.

23VAC10-140-282. Withholding on lottery prizes.

A. Amount to be withheld. The Lottery Department shall withhold Virginia income tax at the rate of 4.0% on the proceeds from any lottery prize in excess of $5,000. The tax shall be withheld on the entire amount of the prize, not merely the amount in excess of $5,000. The tax must be withheld by the Lottery Department on the date of actual or constructive payment, whichever is earlier, as defined in federal Treasury Regulation § 31.3402(a)-1. Constructive payment means when the amount awarded is credited to the account of the taxpayer or set apart for future withdrawals, although not actually reduced to possession.

B. Prizes subject to withholding. Withholding is required on (i) any payment of proceeds in excess of $5,000; (ii) any installment payment of $5,000 or less, if the aggregate proceeds from a wager exceed or will exceed $5,000 or (iii) any periodic payment of $5,000 or less, when payments are to be made for the life of a person (or for the lives of more than one person), if it is actuarially determined that the aggregate proceeds from a wager are expected to exceed $5,000.

The provisions of this section may be illustrated as follows:

Example 1: "A" purchases a lottery ticket of $1.00 in the state lottery from an authorized agent. The drawing is held and "A" wins $5,000. Since the proceeds of the wager are not greater than $5,000, the Lottery Department is not required to withhold or deduct any amount from "A's" prizes.

Example 2: Assume the same facts as in Example 1 except that "A" wins $5,001. The Lottery Department must deduct and withhold tax at a rate of 4.0% from $5,000 or $200.04.

Example 3: "B" purchases a lottery ticket for $1.00 in the state lottery from an authorized agent. The lottery drawing is held and "B" wins the grand prize, $50,000, payable at the rate of $1,000 a month. The Lottery Department must deduct and withhold at the rate of 4.0% on each monthly payment.

Example 4: "C" purchases a ticket for $1.00 in the state lottery from an authorized agent. The drawing is held and "C" wins $1,000 a year for the rest of "C's" life. It is actuarially determined that "C's" life expectancy is 10 years. Based on that determination, the proceeds from the wager paid to "C" will exceed $5,000. Therefore, the Lottery Department must deduct and withhold 4.0% X $1,000 = $40 from each year's payment.

C. Persons subject to withholding.

1. Residents and part-year residents. All persons who qualify as residents and part-year residents of Virginia as defined under Chapter 3 of Title 58.1 of the Code of Virginia are subject to withholding for lottery prizes in the amount designated in subsection A above.

2. Nonresidents. Withholding will be required for all nonresident lottery winners. Nonresidents will be required to file a nonresident return when Virginia gross income, including lottery prizes, exceeds the thresholds in § 58.1-321 of the Code of Virginia. Any nonresident who has become liable to his state of residence for income tax on Virginia source income may become eligible for a credit as provided in § 58.1-332 of the Code of Virginia.

Statutory Authority

§§ 58.1-203 and 58.1-4006(B)(1) of the Code of Virginia.

Historical Notes

Derived from VR630-6-4006 § 3, eff. November 21, 1990.

23VAC10-140-283. Lottery winnings; forms and reporting.

A. Federal. The Lottery Department shall report every lottery prize of $600 or more on Form W-2G. Form W-2G must be prepared and filed in accordance with the regulations promulgated by the Internal Revenue Service.

B. State. The Lottery Department shall file Virginia state income tax withholding returns in accordance with § 58.1-472 of the Code of Virginia. The Lottery Department shall report state withholding amounts on proceeds in excess of $5,000. The Lottery Department shall not be required to report any prize of less than $600.

Statutory Authority

§§ 58.1-203 and 58.1-4006(B)(1) of the Code of Virginia.

Historical Notes

Derived from VR630-6-4006 § 4, eff. November 21, 1990.

23VAC10-140-284. Provisions of Chapter 3 of Title 58.1 of the Code of Virginia to apply.

The income tax provisions of Chapter 3 of Title 58.1 of the Code of Virginia and the regulations promulgated thereunder shall apply to the amounts withheld by the Lottery Department, except as otherwise provided by law and 23VAC10-140-280 through 23VAC10-140-284.

Statutory Authority

§§ 58.1-203 and 58.1-4006(B)(1) of the Code of Virginia.

Historical Notes

Derived from VR630-6-4006 § 5, eff. November 21, 1990, retroactive to September 20, 1988.

FORMS (23VAC10-140).

Employer Income Tax Withholding Instructions.

Certificate of Non-Residence in the Commonwealth of Virginia, Form VA-3 (eff. 11/88)

Virginia Employee's Withholding Exemption Certificate, Form VA-4 (eff. 6/93).

Virginia Employee's Withholding Income Tax Credit for Income Taxes Paid to Another State, Form VA-4B (eff. 6/84).

Virginia Withholding Exemption (Instructions), Form VA-4P (eff. 9/91).

Employer's Return of Virginia Income Tax Withheld, Form VA-5 (eff. 5/94).

Employer's Annual or Final Summary of Virginia Income Tax Withheld, Form VA-6 (eff. 11/93).

Employer's Annual or Final Summary of Virginia Income Tax Withheld (COPY), Form VA-6A (eff. 8/92).

Employer's Voucher for Payment of Virginia Income Tax Withheld (Semi-Weekly), Form VA-15 (eff. 2/94).

Employer's Payments Quarterly Reconciliation and Return of Virginia Income Tax Withheld, Form VA-16 (eff. 11/93).

Combined Registration Application, Form R-1 (eff. 10/89).

Instructions for Completing Combined Registration, Form R-4 (eff. 10/89).

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