Most Common Mistakes Committed by Business Taxpayers
Taxpayers not following the filing frequencies assigned to them
This problem is very prevalent around the beginning of each year after the Department of Taxation has evaluated your last 12 months of filings. Taxpayers usually receive two notices advising of the changes to the filing frequency, if there is going to be a change. If you use a third party payroll provider (Paychex, ADP, etc.), it is the responsibility of the taxpayer to notify them of the new filing frequency.
Taxpayers having problems understanding how 500C addition to tax is calculated
Form 500C is a worksheet that will explain exactly how the 500C addition to tax is calculated on your Corporation tax returns. The basis for the addition to tax is that you did not meet one of the following exemptions:
Form 500C will allow you to calculate the addition to tax due by using the estimated tax payments that you made for the current tax year. The dates those equal estimated payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of your tax year.
- You did not pay at least 100% of the previous year's tax due in four equal installments for the current tax year.
- You did not pay at least 90% of the tax due for the current year in four equal installments.
- Exception 3 requires a corporation to compute the tax on annualized income.
This exception applies if the estimated tax paid was equal to or more than 90% of
the amount the corporation would owe if estimated tax was figured on annualized
taxable income for the months preceding an installment date.
Taxpayers not using blank forms when they have run out of the pre-printed returns
The use of pre-printed forms causes many problems for the Virginia Department of Taxation and taxpayers. The pre-printed forms are coded with information that a computer reads when processing the returns and payments. The computer will apply the return and payment to the period which is coded on these pre-printed forms. It does not help if a taxpayer scratches out the pre-printed information and writes in the correct information. If you do not have a pre-printed form to use for your tax filings, please go to our website, www.tax.virginia.gov, and download a blank form to use. These blank forms will not be processed by the computer and will prompt an employee to pull the return and payment so they can be posted correctly.
Taxpayers think that unemployment tax is handled by the Virginia Department of Taxation
Unemployment Tax is handled by the Virginia Employment Commission (VEC). The Department of Taxation has an agreement with VEC that allows taxpayers to use our iREG program to also register for Unemployment Tax. In addition, the joint initiative also allows unemployment taxes to be submitted using our Business iFile and Web Upload Systems. This is done for the convenience of taxpayers so they do not have to go to more than one website to register and pay taxes for both agencies. If you have any questions about Unemployment Tax, you can contact the Virginia Employment Commission at 804-786-3066 or 800-828-1140.
Misunderstanding how the $1,200 penalty is calculated for Pass-Through Entity Returns
A pass-through entity that is required to file a return but fails to do so by the extended due date is liable for a penalty of $200 for each month or part of a month that the return is late, for up to six months.
If a pass-through entity does not file Form 502 on or before the extended due date, the automatic extension is not valid and the late-filing penalty is assessed as if no extension had been granted.
- The due date of Form 502 is April 15.
- The automatic six-month filing extension moves the due date to October 15
- If Form 502 has not been filed by October 15, the automatic extension becomes void. The late-filing penalty is calculated from the original due date of April 15.
$200/month penalty for late filing X 6 months late filing the return = $1,200 penalty