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Pass-Through Entities

S Corporations, Partnerships and Limited Liability Companies

General Filing Information

Every pass-through entity (PTE) that does business in Virginia or receives income from Virginia sources must file an income tax return on Form 502.

The term "pass-through entity" includes S corporations, general partnerships, limited partnerships, limited liability partnerships (LLPs), limited liability companies (LLCs), electing large partnerships and business trusts. A pass-through entity is any entity other than an individual estate or trust that is recognized as a separate entity for federal income tax purposes and the owners of which report their distributive or pro rata shares of the entity's income, gains, losses, deductions and credits on their own returns.

For purposes of the filing requirement, the definition of "pass-through entity" does not include single-member limited liabilities or investment pass-through entities. For further information, review Tax Bulletin 05-6.

Form 502 must be filed by the 15th day of the fourth month following the close of the entity's taxable year. For example, calendar year returns must be filed on or before April 15 each year.

Electronic Filing Requirement

Beginning January 1, 2015, all pass-through entities are required to file their annual returns and make all payments electronically.  This is effective beginning with taxable year 2014 returns, return payments and withholding payments.  The Department offers several options for electronically filing PTE returns and payments:

  • The PTE e-File program works with the IRS e-File program and allows both the federal and state returns to be filed together through one secure system.
  • A free online 502EZ eForm will be available, beginning January 2015, for filing the annual return and making a tax due payment if you meet certain eligibility requirements.  
  • A free online 502W eForm will be available, beginning January 2015, for making withholding payments.
  • A bank ACH credit may be used to make tax due payments or withholding payments. 

PTEs that are unable to file and pay electronically should request a waiver.

Filing Extension

An automatic six-month filing extension is allowed for pass-through entities filing on Form 502. No application for extension is required. To avoid late-filing penalties, Form 502 must be filed no later than six months from the original due date of the return. For example, a calendar year Form 502 is due on April 15; therefore, the return must be filed no later than October 15 for the six-month extension provision to apply.

The automatic extension of time to file does not extend the payment due date for withholding tax. The withholding tax payment is due on the due date of the pass-through entity's return regardless of whether the extension to file the income return (Form 502) is used. Use Form 502W to make the withholding tax payment by the due date.

Penalty

The penalty for filing Form 502 after the due date is $200 per month for a maximum of six months from the original due date. The late payment penalty is equal to 6 percent of the tax due per month, with a maximum penalty of 30 percent of the tax due.

Accordingly, a Form 502 that is filed more than 6 months after the original due date will be subject to the greater of the late-payment penalty or the late-filing penalty of $1,200.

Unified Filing

If any of the owners (shareholders, partners, members) of a pass-through entity are nonresidents whose only source of income from Virginia is the pass-through entity, the entity may be eligible to file a unified Virginia income tax return on behalf of the nonresident owners using Form 765.

This filing does not replace the filing of Form 502 for the entity itself. For complete information on unified filing, refer to the instructions for Form 765.

Schedule VK-1 - Paper Consolidated Options

If filing a paper return for tax year 2013 or earlier, or if a waiver from electronic filing has been granted, PTEs reporting nine or more owners must use the Schedule VK-1 Consolidated to report the owner’s share of income, modifications, allocations, and the total additions, subtractions and credits reported on the Schedule VK-1.

The Schedule VK-1 Consolidated allows multiple owners to be reported on one summary sheet while maintaining the taxpayer disclosure agreement.

Examples of each summary sheet, Fillable PDF or Excel, are provided and separated by tax year.

2013 VK-1 Forms

2012 VK-1 Forms

 

Last Updated 11/14/2014 11:58

 

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