Electronic filing requirement
Corporations are required to file and pay all annual income tax returns, estimated payments, and extension payments electronically. See How to File and Pay below for payment options.
When to file
- Calendar-year filers: April 15
- Fiscal-year filers: 15th day of the 4th month following the close of your taxable year
- Nonprofits: 15th day of the 6th month following the close of your taxable year
If the deadline falls on a Saturday, Sunday, or holiday, you have until the next business day to file your return.
- Filing Requirements
- How to File and Pay
- Estimated Tax and Extensions
- Penalties and Interest
- Net Operating Loss
General Filing Requirements
Every corporation that is incorporated under Virginia law, or that has registered with the State Corporation Commission for the privilege of conducting business in Virginia, or that receives income from Virginia sources, must file a Virginia corporation income tax return (Form 500).
Nonprofit organizations are only required to file a Virginia corporation income tax return if they incurred unrelated business taxable income at the federal level.
S-corporations: Corporations that have elected S status for federal purposes are automatically treated as S-corporations for Virginia purposes, and must file Form 502. Refer to the Pass-Through Entities page for information about S-corporation filing requirements.
The tax rate is 6% of Virginia taxable income. Corporations that conduct business in more than one state must allocate and apportion their income, using Virginia Schedule A.
A domestic corporation is any corporation that is organized and incorporated (chartered) under the laws of Virginia. A domestic corporation must file a Virginia income tax return each year, even if it has no income to report.
A foreign corporation is any corporation that is incorporated in another state or country. A foreign corporation that has registered with the State Corporation Commission for the privilege of conducting business in Virginia must file a Virginia income tax return each year, even if the company has not conducted business in the Commonwealth or has no income to report. Other foreign corporations must file Virginia returns for taxable years in which they receive income from Virginia sources.
Nexus for foreign corporations is determined under the provisions of Public Law 86-272. For rulings on nexus, visit our Laws, Rules, & Decisions.
Filing by Affiliated Groups
For corporations to be considered affiliated for purposes of filing a consolidated or combined return, 1 of the following relationship tests must be met:
- 1 corporation must own 80% of the voting stock of another or others; or
- At least 80% of the voting stock of the corporations included in the Virginia affiliated group must be owned by a common interest.
Each corporation included on a consolidated or combined return must itself be subject to Virginia income tax.
The election to file on a separate, consolidated, or combined basis is made in the first year in which a group of affiliated corporations becomes eligible to file a consolidated or combined return in Virginia. The filing of the Virginia corporation income tax return is considered an election to file under the chosen basis. As a general rule, once the election is made, subsequent returns must be filed on the same basis, unless the Tax Commissioner grants permission to change. The election is also binding for any members that join the affiliated group.
Because the initial filing is an election by the group, the corporations involved do not need permission from the Tax Commissioner to file on their elected basis. Also, since other corporations who later join the group or become subject to Virginia income tax are required to file under the group's established basis, they do not need permission to be included in the original election. Only an affiliated group that wants to change its basis after an election has been made must request permission from the Tax Commissioner. Requests for permission to change from the elected method must be made on or before the due date of the return for the taxable year for which the change will be effective.
A request to change from one filing status to another must be submitted before the due date of the first return to use the requested filing status. Effective July 1, 2017, a $100 administrative fee, Form Filing Status-Fee, and a copy of federal Form 851 must accompany all requests. Mail your request to Virginia Tax, PO Box 27203, Richmond, VA 23218-7203
We will generally grant requests to change a filing status from separate to combined or from combined to separate. Requests to change a filing status to or from consolidated will generally be denied unless there are extraordinary circumstances. However, a group of affiliated corporations that has filed Virginia income tax returns on the same basis for at least the preceding 20 years will be granted permission to change its filing status from consolidated to separate or from separate or combined to consolidated if:
- The tax computed under the affiliated group’s requested return basis would be equal or greater than the tax for the preceding taxable year; and
- The affiliated group agrees to compute its tax liability under both the new filing status and the former filing status and pay the greater of the 2 amounts for the first 2 taxable years in which the new filing status is effective
How to File and Pay
Annual income tax return
- All corporations can file their annual income tax return (Form 500) and pay any tax due using approved software products.
- Certain corporations may qualify to electronically file a short version of the return (Form 500EZ) using eForms. If tax is due, you can pay direct debit from a checking account. Instructions for filing Form 500EZ.
Form 500EZ eligibility
Your corporation must meet all of the following conditions:
- 100% of its business is in Virginia
- is not a pass-through-entity (PTEs may be eligible for the 502EZ)
- federal taxable income does not exceed $40,000
- total additions to federal taxable income equal $1000 or less
- total subtractions to federal taxable income equal $1000 or less
- is not included in consolidated or combined filing of another entity
- will not claim a Net Operating Loss Deduction for year being filed
- does not claim any tax credits except tentative tax payments or estimated tax payments
- is not required to pay Federal Alternative Minimum Tax
- is not a telecommunications corporation required to file Form 500T or an electric cooperative required to file Form 500EL
- does not claim any Fixed Date Conformity (FDC) adjustments or modifications
500EZ Eligibility for HOAs:
- If you're filing a return as an HOA and don't owe any tax or will get a refund, then the restrictions for federal taxable income, additions, and subtractions described above do not apply.
- If you will owe tax, then you must comply with all of the requirements described above.
Note: Taxpayers who submit Form 500EZ are not required to submit a copy of their federal return. Please maintain a copy of your federal return with your records and do not mail a copy to Virginia Tax.
Other payment options
- Business online services account. Make estimated tax payments, extension payments, and return payments through your business account. Don't have an account, enroll here. You'll need your Federal Employer ID Number (FEIN), your Virginia Tax account number, and information from your most recently filed Virginia tax return (if you've filed a return) to enroll.
- eForms.If you're not ready to create an account, you can pay from a checking account using the appropriate eForm. No login or password is required.
You can use ACH Credit for estimated tax payments, extension payments, and return payments. You’ll need to contact your corporation’s bank to make arrangements to credit the state’s bank account with funds from your bank account. Your bank may charge a fee for this service. Find detailed instructions about initiating ACH Credit transactions in our electronic payment guide.
If electronic filing causes an undue hardship, and you are unable to file and pay electronically, you may request a hardship waiver.
Every corporation subject to state income tax must make a declaration of estimated income tax for the taxable year if the corporation's state income tax for the same period, minus any allowable credits, is expected to exceed $1,000.
Taxpayers filing on a fiscal year or calendar year basis should follow the declaration and payment schedule in the table shown below. A declaration of estimated income tax is not required for a period of less than 12 months, if:
- the period is less than 4 months, or
- the filing requirements are first met after the first day of the last month in a short taxable year.
Compute taxable income for the short taxable period on an annual basis by multiplying the income amount by 12 and dividing the result by the number of months in the short period. Refer to the table below to determine when you need to file the declaration and the number and the dollar amount of installments you'll need to pay. You are not required to annualize your income if the short taxable year does not change your accounting period.
If the requirements are first met….
|The declaration shall be electronically paid on or before…||The number of installments to be paid is…||The Following % of the estimated tax shall be paid on or before the 15th day of the …|
|4th month||6th month||9th month||12th month|
|before the 1st day of the 4th month of the taxable year||the 15th day of the 4th month of the taxable year||4||25%||25%||25%||25%|
|after the last day of the 3rd month and before the 1st day of the 6th month of the taxable year||the 15th day of the 6th month of the taxable year||3||-||33%||33%||33%|
|after the last day of the 5th month and before the 1st day of the 9th month of the taxable year||the 15th day of the 9th month of the taxable year||2||-||-||50%||50%|
|after the last day of the 8th month and before the 1st day of the 12th month of the taxable year||the 15th day of the 12th month of the taxable year||1||-||-||-||100%|
How to pay estimated taxes
|Online System||eForms||Business Account|
|Computer Skill Needed||Basic||Intermediate|
|Able to Schedule Payments for a Future Date||Yes||Yes|
|Able to View History||No||14 months|
|Requires Log-In and Password||No||Yes|
|Payment by Debit EFT||Checking
An automatic 6-month filing extension is allowed for corporation income tax returns. (Beginning with returns due April 15, 2017, C-corporations have an automatic 7-month filing extension. The extension period remains 6 months for all other corporate entities. See Tax Bulletin 17-9 for details.) However, the extension provisions do not apply to payment of any tax due with your return. To avoid penalties, you must pay at least 90% of your final tax liability by the original due date for filing the return. Interest will apply to any balance left that is not paid by the original due date.
Make an extension payment
ACH Credit: A corporation may also pay its estimated tax and extension payments by initiating an ACH credit transaction through its bank. Some banks may charge a fee for this service. An Electronic Payment Guide is available with information on how to submit ACH credit payments to Virginia Tax.
You are allowed an automatic 6-month extension for filing your corporation income tax returns, but there is no extension for payment of taxes due. Beginning with returns due April 15, 2017, C-corporations will have an automatic 7-month filing extension.
To avoid an extension penalty, you need to pay at least 90% of the corporation's final tax liability by the original due date for filing the return. If you file your return during the extension period, but the tax due exceeds 10% of your total tax liability, an extension penalty will apply.
The extension penalty is assessed on the balance of tax due at a rate of 2% per month or part of a month, from the original due date until the date the return is filed, to a maximum of 14% (12% for nonprofit corporations and entities other than C-corporations).
Note: In addition, if the tax is not paid in full when the return is filed, a late payment penalty will apply at the rate of 6% per month or part of a month from the date the return is filed through the date the tax is paid, to a maximum of 30%. If the return is filed during the extension period, but the tax due is not paid when the return is filed, both the extension penalty and the late payment penalty may apply. The extension penalty will apply from the due date of the return through the date the return is filed. The late payment penalty (6% of the amount due) will apply from the date the return is filed through the date of payment.
To avoid paying the late payment penalty during the extension period, the tax owed must be paid when the return is filed.
Example: Combined Extension and Late Payment Penalty Assessment
A corporation’s income tax return was due on April 15. The return was filed on June 30, but the corporation did not pay the tax due of $2,000 until July 10th. The tax due was more than 10% of the total tax liability for the year, so the corporation is subject to the extension penalty for April, May, and June. Since the corporation didn't pay the tax due when the return was filed, a late payment penalty will also apply for June. The extension penalty and late payment penalty will be assessed as follows:
Tax due reported on return $2,000.00
Extension penalty (3 months @ 2% per month) 120.00
Late payment penalty (1 month @ 6%) 120.00
Note: Interest applies to any balance of tax due that is not paid by the due date, even if the associated return is filed under extension.
Late Filing Penalty
If the return is filed after the extended due date, a 30% late filing penalty will apply on the balance of tax due with the return. The minimum penalty for failure to file timely is $100, and this minimum $100 penalty applies whether or not tax is due for the period covered by the return.
Late Payment Penalty
If you file your return within the extension period and the total amount due is not included with the return, you will be subject to a late payment penalty. Late payment penalty is assessed at a rate of 6% per month from the date of filing through the date of payment, with a maximum penalty of 30%. The late payment penalty will not be applied for any month in which a late filing penalty has been assessed.
The late payment penalty is generally not assessed when an additional balance of tax is assessed as the result of an audit of an income tax return that was filed in good faith.
Virginia law requires Virginia Tax to assess interest on any balance of unpaid tax, from the due date for payment through the date the tax is paid. Interest charges apply to late payments and payments made with returns filed on extension, as well as to additional balances due with amended returns or assessed as the result of audit adjustments.
Interest is assessed at the federal underpayment rate established under Internal Revenue Code Section 6621, plus 2%. For the current daily interest rate, contact us.
Other Penalties & Fees
Penalties for fraud and failure to file
In addition to the penalties above, Virginia law provides for civil and criminal penalties in cases involving fraud and failure to file. The civil penalty for filing a false or fraudulent return, or for failing or refusing to file a return with intent to evade the tax, is 100% of the correct tax. In addition, criminal penalties of imprisonment for up to one year or a fine of up to $2,500, or both, can apply in cases of fraud and failure to file.
Returned payment fee
If your financial institution does not honor your payment to us, we may charge a fee of $35 (Code of Virginia § 2.2-614.1). This fee is in addition to any other penalty or interest charged.
Any corporate, partnership, or limited liability officer may be held personally liable for unpaid taxes assessed against a corporation or partnership.
The term "corporate, partnership, or limited liability officer" includes any officer or employee of a corporation, or a member, manager, or employee of a partnership or limited liability company, whose duty is to collect, account for, and pay the assessed tax, who had knowledge of the failure to pay the tax, and who had the authority to prevent the failure. Code of Virginia § 58.1-1813
Net Operating Losses
A net operating loss (NOL) results when a corporation's allowable deductions for federal purposes exceed its income. Virginia law recognizes such NOL deductions to the extent the losses are included in federal taxable income (See Code of Virginia § 58.1-301 for exceptions). Currently, Virginia does not allow a 5-year carry-back of net operating losses as federal corporation law does. Virginia allows corporations a 2-year carry-back. For Virginia purposes, an NOL can be carried forward for 20 years. It may be necessary to keep a separate set of books for federal purposes and Virginia purposes.
Form to File
Include a copy of federal Form 1139
Submit Form 500 NOLD to:
Virginia Department of Taxation
P.O. Box 1500
Richmond, VA 23218
For further information, refer to Form 500-NOLD. For information on fixed date conformity provisions for net operating losses incurred after December 31, 2001, view Advancement of Virginia's Fixed Date Conformity to the Internal Revenue Code.
Does a corporation have the option to carry-forward its NOL instead of first carrying it back for Virginia purposes?
Yes, Virginia does allow a corporation to carry-forward its NOL instead of carrying it back first. An election statement to forego the carry-back must be included in the Virginia return in the year the loss was incurred clearly stating that the corporation is electing to forego the carry-back. This statement is required any time the Virginia and federal returns do not include all of the same entities and/or use the same filing status. Without this statement, the NOL must be carried back first. It would be carried back to the earliest of the 2 years first.
How do adjustments to federal taxable income (FTI) affect an NOL or an NOL carry-back/carry-forward?
For Virginia purposes, items such as Contribution Subtraction Limitations, Domestic Production Activities Subtraction Limitations, Special Depreciation Non Conformity issues, and other similar adjustments will modify the true FTI figure. The true amount of NOL available for carry-back or carry-forward, as well as the true amount of FTI that the loss carry-back or carry-forward is applied to, is modified by these adjustments. FTI cannot be reduced to a figure lower than zero when applying an NOL carry-back or carry-forward after these adjustments to FTI have been considered.
Additions and subtractions, in the year the loss is incurred, must be carried as modifications with the loss when it is used as a carry-back or carry-forward. How do I identify the additions and subtractions that follow the loss as modifications?
Only additions and subtractions identified in Code of Virginia § 58.1-402 follow the loss as modifications. These modifications follow the loss in the same proportionate share that the loss is used. So if 30% of a 2009 loss is being carried back to 2007, then 30% of the net additions and subtractions (modifications) from 2009 also get carried back to 2007. It is possible that, after the NOL carry-back or carry-forward is applied bringing FTI down to zero, a tax may still be due because of these modifications.