Virginia Law

Article 16. Income Tax Withholding.

For the purposes of this article:

"Employee" includes an individual, whether a resident or a nonresident of the Commonwealth, who performs or performed any service in the Commonwealth for wages, or a resident of the Commonwealth who performs or performed any service in the service outside the Commonwealth for wages. The word "employee" also includes an officer, employee, or elected official of the United States, the Commonwealth, or any other state or any territory, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing or an officer of a corporation. The term shall not include the beneficial owner of an individual retirement account (IRA) or simplified employee pension plan (SEPP).

"Employer" means the Commonwealth, or any political subdivision thereof, the United States, or any agency or instrumentality of any one or more of the foregoing, or the person, whether a resident or a nonresident of the Commonwealth, for whom an individual performs or performed any service as an employee or from whom a person receives a prize in excess of $5,001 pursuant to the Virginia Lottery Law (§ 58.1-4000 et seq.), except that:

1. If the person, governmental unit, or agency thereof, for whom the individual performs or performed the service does not have control of the payment of the wages for such services, the term "employer" (except as used in the definition of "wages" herein) means the person having control of the payment of such wages, and

2. In the case of a person paying wages on behalf of a nonresident person not engaged in trade or business within the Commonwealth or on behalf of any governmental unit or agency thereof not located within the Commonwealth, the term, "employer" (except as used in the definition of "wages" herein) means such person. The term shall not include a financial institution, corporation, partnership or other person or entity with respect to benefits paid as custodian, trustee or depository for an individual retirement account (IRA) or simplified employee pension plan (SEPP).

"Miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

"Payroll period" means a period for which a payment of wages is ordinarily made to the employee by his employer.

"Wages" means wages as defined under § 3401 (a) of the Internal Revenue Code, as well as any other amounts from which federal income tax is withheld under the provisions of §§ 3402 and 3405 of the Internal Revenue Code and also includes all prizes in excess of $5,001 paid by the Virginia Lottery; however, such term shall not include amounts paid pursuant to individual retirement plans and simplified employee pension plans as defined in §§ 7701 (a)(37) and 408 (c) of the Internal Revenue Code and shall not include remuneration paid for acting in or service as a member of the crew of a (i) motion picture feature film, (ii) television series or commercial, or (iii) promotional film filmed totally or partially in the Commonwealth by an individual or corporation which conducts business in the Commonwealth for less than 90 days of the tax year and when such film, series or commercial is processed, edited and marketed outside the Commonwealth. Every such individual or corporation shall, immediately subsequent to the filming of such portion of the film, series or commercial filmed in the Commonwealth, file with the Commissioner on forms furnished the Department, a list of the names and social security account numbers of each actor or crew member who is a resident of the Commonwealth and is compensated by such individual or corporation.

Code 1950, § 58-151.1; 1962, c. 612; 1980, c. 629; 1984, c. 675; 1987, c. 531; 1991, cc. 362, 456; 1992, c. 519; 1993, c. 54; 2014, c. 225.

Every employer making payment of wages shall deduct and withhold with respect to the wages of each employee for each payroll period an amount determined as follows: Such amount which, if an equal amount was collected for each similar payroll period with respect to a similar amount of wages for each payroll period during an entire calendar year, would aggregate or approximate the income tax liability of such employee under this chapter after making allowance for the personal exemptions to which such employee could be entitled on the basis of his status during such payroll period and after making allowance for withholding purposes for a standard deduction from wages in accordance with the laws of the United States relating to federal income taxes and after making an allowance for any credit available to the employee as provided by § 58.1-332, and without making allowance for any other deductions. In determining the amount to be deducted and withheld under this article, the wages may, at the election of the employer, be computed to the nearest dollar.

An employer shall not be required to deduct any amount upon a payment of wages to an employee if there is in effect with respect to such payment a withholding exemption certificate, in such form and containing such other information as the Tax Commissioner may prescribe, furnished by the employee to the employer, certifying that the employee: (i) incurred no liability for income tax imposed by this chapter for his preceding taxable year; and (ii) anticipates that he will incur no liability for income tax imposed by this chapter for his current taxable year.

Code 1950, § 58-151.2; 1962, c. 612; 1971, Ex. Sess., c. 171; 1972, c. 827; 1984, cc. 675, 682.

The amount of tax to be withheld for each individual shall be based upon tables to be prepared and distributed by the Tax Commissioner. The tables shall be computed for the several permissible withholding periods and shall take account of the number of exemptions allowed under the laws of the United States relating to federal income taxes and the standard deduction as provided in § 58.1-461. The amounts computed for withholding shall be such that the amount withheld for any individual during his taxable year shall approximate in the aggregate as closely as practicable the tax which is levied and imposed under this chapter for that taxable year, upon his salary, wages or compensation for personal services of any kind for the employer.

Code 1950, § 58-151.3; 1962, c. 612; 1971, Ex. Sess., c. 171; 1984, c. 675.

The Tax Commissioner may grant permission to employers who do not desire to use the withholding tax tables provided in accordance with § 58.1-462, 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 Tax 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.

Code 1950, § 58-151.4; 1962, c. 612; 1984, c. 675.

A. 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.

B. 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.

C. The Tax Commissioner may, by regulations, authorize employers:

1. To estimate the wages which will be paid to any employee in any quarter of the calendar year;

2. To determine the amount to be deducted and withheld upon each payment of wages to such employee during such quarter as if the appropriate average of the wages so estimated constituted the actual wages paid; and

3. To deduct and withhold upon any payment of wages to such employee during such quarter such amount as may be necessary to adjust the amount actually deducted and withheld upon the wages of such employee during such quarter to the amount that would be required to be deducted and withheld during such quarter without regard to this subsection C.

Code 1950, § 58-151.5; 1962, c. 612; 1984, c. 675.

The manner of withholding and the amount to be deducted and withheld under this article shall be determined in accordance with regulations prescribed by the Tax Commissioner under which the withholding exemption allowed to the employee in any calendar year shall approximate the withholding exemption allowable with respect to an annual payroll period, if a payment of wages is made to an employee by an employer:

1. With respect to a payroll period or other period, any part of which is included in a payroll period or other period with respect to which wages are also paid to such employee by such employer;

2. Without regard to any payroll period or other period, but on or prior to the expiration of a payroll period or other period with respect to which wages are also paid to such employee by such employer;

3. With respect to a period beginning in one and ending in another calendar year; or

4. 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.

Code 1950, § 58-151.6; 1962, c. 612; 1984, c. 675.

The Tax Commissioner is authorized to provide by regulations, under such conditions and to such extent as he deems proper, for withholding in addition to that otherwise required under this article in cases in which the employer and the employee agree to such additional withholding. Such additional withholding shall for all purposes be considered tax required to be deducted and withheld under this article.

Code 1950, § 58-151.7; 1962, c. 612; 1984, c. 675.

If the employer, in violation of the provisions of this article, fails to deduct and withhold the tax under this article, and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer. This section shall in no case relieve the employer from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withhold.

Code 1950, § 58-151.8; 1962, c. 612; 1984, c. 675.

In the event that any employer deducts and withholds taxes from the compensation of an employee but fails to pay over the money so deducted and withheld to the Commonwealth, such employee shall not be held liable for the payment of such taxes but shall be entitled to a credit for the moneys so deducted and withheld as if the same had legally been paid over by the employer as required by this chapter. The burden of proving that such an employer deducted and lawfully withheld state income tax shall rest upon the employee.

Code 1950, § 58-151.8:1; 1970, c. 369; 1984, c. 675.

If the remuneration paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than thirty-one consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.

Code 1950, § 58-151.9; 1962, c. 612; 1984, c. 675.

A. An employee receiving wages shall be entitled to the exemptions for which such employee qualifies under the laws of the United States relating to federal income taxes.

B. Every employee shall at the time of commencing employment furnish his employer with a signed withholding exemption certificate relating to the withholding exemptions which he claims, which in no event shall exceed the sum of exemptions to which he is entitled.

C. 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.

D. A withholding exemption certificate which takes effect under this section 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 his 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 thirty days after the date on which such new certificate is furnished.

E. If, on any day during the calendar year, the sum 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 different from the sum of exemptions to which the employee is entitled on such day, the employee shall in such cases and at such times as the Tax Commissioner may prescribe, furnish the employer with a withholding exemption certificate relating to the exemptions which he claims with respect to such next taxable year, which shall in no event exceed the sum of exemptions to which he will be, or may reasonably be expected to be, so entitled. 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.

F. If, on any day during the calendar year, the sum of withholding exemptions to which the employee is entitled is less than the sum of withholding exemptions claimed by the employee on the withholding exemption certificate then in effect with respect to him, the employee shall, within ten days thereafter, 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 sum of exemptions to which he is entitled on such day. If, on any day during the calendar year, the sum of withholding exemptions to which the employee is entitled is greater than the sum 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 sum of exemptions to which he is entitled on such day.

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

Code 1950, § 58-151.11; 1962, c. 612; 1971, Ex. Sess., c. 171; 1984, c. 675.

Any individual required to supply information to his employer under this article who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under this article, shall be guilty of a Class 1 misdemeanor.

Code 1950, § 58-151.12; 1962, c. 612; 1984, c. 675.

Every employer required to deduct and withhold from an employee's wages under this article shall make return and pay over to the Tax Commissioner the amount required to be withheld hereunder as follows:

1. Every employer whose monthly liability is less than $100 or who is subject to subdivision 3 shall make return and pay over the required amount on or before the last day of the month following the close of each quarterly period;

2. Every employer whose average monthly liability can reasonably be expected to be $100 or more shall file a return and pay the tax monthly, on or before the twenty-fifth day of the following month;

3. Every employer whose average monthly liability can reasonably be expected to be $1,000 or more and the aggregate amount required to be withheld by any employer exceeds $500 shall, in addition to the requirements of subdivision 1, file a form with the Tax Commissioner within three banking days following the close of any period for which the employer is required to deposit federal withholding tax and pay the amount so withheld, except when a payment is due within three days of the due date for the filing of the quarterly returns, then such payment shall be made with such return. Any employer otherwise required to file a return and pay the withholding tax pursuant to this subdivision that has no more than five employees subject to withholding under this article may request a waiver from the Tax Commissioner authorizing the employer to file the return and pay the withholding tax pursuant to subdivision 2.

The Tax Commissioner may authorize an employer to file seasonal returns when in his opinion the administration of the tax imposed under this article would be enhanced. Any employer making payment under subdivision 3 will be deemed to have met the requirements hereof if at least ninety percent of actual tax liability for such period is paid. Employers authorized to file seasonal returns under this paragraph shall file each return on or before the twentieth of the month following the close of the reporting period.

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

Code 1950, § 58-151.13; 1962, c. 612; 1968, c. 12; 1970, c. 540; 1972, c. 827; 1973, c. 279; 1974, c. 636; 1975, c. 49; 1977, cc. 396, 663; 1981, c. 283; 1984, c. 675; 1988, c. 899; 1991, cc. 362, 456; 2007, c. 753; 2015, c. 156; 2016, cc. 660, 676.

If the Tax Commissioner, in any case, has reason to believe that the collection of moneys, required by this article to be withheld by the employer, is in jeopardy, he may require the employer to make such return and pay to the Tax Commissioner such amounts required to be withheld at any time the Tax Commissioner may designate therefor subsequent to the time when such amounts should have been deducted from wages and withheld.

Code 1950, § 58-151.13; 1962, c. 612; 1968, c. 12; 1970, c. 540; 1972, c. 827; 1973, c. 279; 1974, c. 636; 1975, c. 49; 1977, cc. 396, 663; 1981, c. 283; 1984, c. 675.

Every employer who fails to withhold or pay to the Tax Commissioner any sums required by this article to be withheld and paid shall be personally and individually liable therefor. Any sum or sums withheld in accordance with the provisions of this article shall be deemed to be held in trust for the Commonwealth.

Code 1950, § 58-151.13; 1962, c. 612; 1968, c. 12; 1970, c. 540; 1972, c. 827; 1973, c. 279; 1974, c. 636; 1975, c. 49; 1977, cc. 396, 663; 1981, c. 283; 1984, c. 675.

A. Any employer required under the provisions of this article to deduct and withhold from wages and make returns and payments of amounts withheld to the Tax Commissioner, who fails to withhold such amounts or to make such returns, or who fails to remit amounts collected to the Tax Commissioner, or otherwise fails to remit to the Tax Commissioner as required by this article, shall be subject to a penalty equal to six percent of the amount that should have been properly withheld and paid over to the Tax Commissioner if the failure is for not more than one month, with an additional six percent for each additional month or fraction thereof during which such failure continues, not exceeding thirty percent in the aggregate. In no case however, shall the penalty be less than ten dollars and such minimum penalty shall apply whether or not any tax is due for the period for which the filing of such return was required.

Interest at a rate determined in accordance with § 58.1-15, shall accrue on the tax until paid, or until an assessment is made, after which interest shall accrue as provided in § 58.1-15. Such penalty and interest shall be assessed by the Tax Commissioner and shall be collected by him in the same manner as the collection of taxes may be enforced under this title.

B. Upon failure of any employer to pay over any amounts withheld or required to be withheld by the employer under this article, the Tax Commissioner may make assessments and enforce the collection of such amounts, including penalties, by any legal process provided for the enforcement of the collection of taxes under this title.

Code 1950, § 58-151.13; 1962, c. 612; 1968, c. 12; 1970, c. 540; 1972, c. 827; 1973, c. 279; 1974, c. 636; 1975, c. 49; 1977, cc. 396, 663; 1981, c. 283; 1984, c. 675; 1991, cc. 316, 331.

Once an employer has become liable to a return of withholding, he must continue to file a return even though no tax has been withheld, until such time as he notifies the Tax Commissioner, in writing, that he no longer has employees or that he is no longer liable for such returns. If an employer requests in writing that he be permitted to change from a monthly return to a quarterly return on the ground that his withholding has become less than $300 for each quarter, such change shall be permitted only at the beginning of a calendar year.

Code 1950, § 58-151.13; 1962, c. 612; 1968, c. 12; 1970, c. 540; 1972, c. 827; 1973, c. 279; 1974, c. 636; 1975, c. 49; 1977, cc. 396, 663; 1981, c. 283; 1984, c. 675.

The Tax Commissioner may grant an employer a reasonable extension of time for filing any return under this article whenever in his judgment good cause exists. Whenever under the terms of such an extension the payment of any amount or amounts of money to the Tax Commissioner by the employer is postponed for a longer period than ten days from the time the same would be otherwise due and payable, such employer shall be charged with interest on such amount or amounts at a rate determined in accordance with § 58.1-15, from the time such amount or amounts were originally due and payable to the date of payment under the terms of the extension.

Code 1950, § 58-151.13; 1962, c. 612; 1968, c. 12; 1970, c. 540; 1972, c. 827; 1973, c. 279; 1974, c. 636; 1975, c. 49; 1977, cc. 396, 663; 1981, c. 283; 1984, c. 675.

A. Every person required to deduct and withhold from an employee's wages under this article shall furnish 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, a written statement in duplicate showing the following: (i) the name of such person; (ii) the name of the employee and his social security account number; (iii) the total amount of wages; and (iv) the total amount deducted and withheld under this article by such employer.

B. The written statements required to be furnished pursuant to this section in respect of any remuneration shall be furnished at such other times, shall contain such other information, and shall be in such form as the Tax Commissioner may by regulations prescribe.

C. 1. Every employer shall file an annual return with the Tax Commissioner, setting forth such information as the Tax Commissioner may require, not later than January 31 of the calendar year succeeding the calendar year in which wages were withheld from employees, and such annual return shall be accompanied by an additional copy of each of the written statements furnished to each employee under subsections A and B.

2. Every employer shall file the annual return and copies of written statements required under this subsection using an electronic medium using a format prescribed by the Tax Commissioner. Waivers shall be granted only if the Tax Commissioner finds that this requirement creates an unreasonable burden on the employer. All requests for waiver shall be submitted to the Tax Commissioner in writing.

D. The Tax Commissioner shall have the authority to require every employer to furnish the names and social security numbers of all employees whose wages or withholding amounts for the taxable year are below levels specified by the Tax Commissioner.

Code 1950, § 58-151.14; 1962, c. 612; 1971, Ex. Sess., c. 171; 1984, c. 675; 1987, c. 9; 1998, c. 335; 2001, cc. 297, 307; 2010, cc. 36, 151; 2016, cc. 660, 676.

No person required to deduct and withhold from another employee's wages and to file a return or report of the same, through use of an electronic medium, with the Department of Taxation as provided under this article, shall be required to provide his own social security number for purposes of fulfilling his duty in filing the return or report. However, nothing in this section shall relieve such person who is filing the return or report from including his name, social security number, wages, taxes deducted and withheld, and other information required under this article in any file, batch, return, report, or statement that incorporates the same information for all employees of the organization and that is required under this article to be submitted to the Department.

2007, c. 770.

A. Where there has been an overpayment to the Tax Commissioner by the employer under this article, the Tax Commissioner shall order a refund or give credit to the employer only to the extent that the amount of such overpayment was not deducted and withheld from the employee's wages under this article. Every such refund shall be made out of the state treasury on the order of the Tax Commissioner upon the Comptroller.

B. Unless written application for refund or credit is received by the Tax Commissioner from the employer within two years from the date the overpayment was made, no refund or credit shall be allowed.

C. Any employer aggrieved by any action of the Tax Commissioner under this section may proceed in court under §§ 58.1-1825 through 58.1-1830 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 Tax Commissioner under subsection B to the time when the Tax Commissioner takes final action with respect to such application shall be excluded from the computation of the period of two years.

Code 1950, § 58-151.16; 1962, c. 612; 1984, c. 675.

The amount deducted and withheld under this article during any calendar year from the wages of any individual shall be allowed to the recipient of the income as a credit against the tax imposed by this chapter for the taxable year beginning in such calendar year. If more than one taxable year begins in a calendar year, such amount shall be allowed as a credit against the tax for the last taxable year so beginning. As a prerequisite to obtaining such credit the individual taxpayer must file with his income tax return one copy of the withholding statement provided for by § 58.1-478.

Code 1950, § 58-151.17; 1962, c. 612; 1984, c. 675.

The tax deducted and withheld under this article shall not be allowed as a deduction either to the employer or to the recipient of the income in computing taxable income under this chapter.

Code 1950, § 58-151.18; 1962, c. 612; 1984, c. 675.

If the income tax law of another state of the United States or of the District of Columbia results in its residents being allowed a credit under § 58.1-332 sufficient to offset all taxes required by this article to be withheld from the wages of an employee, the Tax Commissioner may by regulation relieve the employers of such employees from the withholding requirements of this article with respect to such employees.

Code 1950, § 58-151.19; 1962, c. 612; 1971, Ex. Sess., c. 171; 1984, c. 675.

The Tax Commissioner is hereby designated as the proper official to make request for and to enter into agreements with the Secretary of the Treasury of the United States to provide for compliance with this article by the head of each department or agency of the United States in withholding state income taxes from wages of federal employees and paying the same to the Commonwealth. The Tax Commissioner is hereby authorized, empowered and directed to make request for and to enter into such agreements.

Code 1950, § 58-151.20; 1962, c. 612; 1984, c. 675.

The employer shall be liable for the payment to the Tax Commissioner of the amounts required to be deducted and withheld under this article and an employer who has withheld and paid such amounts to the Tax Commissioner shall not otherwise be liable to any person for the amount of any such payment.

Code 1950, § 58-151.10; 1962, c. 612; 1984, c. 675.

Willful failure by any employer to (i) make any return required by this article to the Tax Commissioner, (ii) withhold the required tax or to pay it to the Tax Commissioner as specified, or both, or (iii) furnish an employee the written statement required by § 58.1-478 shall be a Class 1 misdemeanor.

Code 1950, § 58-151.15; 1962, c. 612; 1984, c. 675.

A. It shall be unlawful for any person to knowingly coerce or threaten an individual to falsely declare his employment status for the purpose of evading the withholding or payment of taxes required under this article.

B. It shall be unlawful for any person to knowingly and falsely claim an individual's employment status for the purpose of evading the withholding or payment of taxes required under this article.

C. In addition to any other penalties provided by law, any violation of this section is punishable as a Class 1 misdemeanor.

D. As used in this section "employment status" has the same meaning as defined by the United States Internal Revenue Code.

2006, c. 393.

If any check tendered for any amount due under this chapter is not paid by the bank on which it is drawn and such person fails to pay the Commissioner the amount due the Commonwealth within five days after the Commissioner has given him written notice by registered or certified mail or in person by an agent that such check was returned unpaid, the person by whom such check was tendered shall be guilty of a violation of § 18.2-182.1.

1984, c. 675; 1992, c. 763.