What Virginia tax underpayment and overpayment interest rates applied in the first quarter of 2011?

Subject

2011 First Quarter Interest Rates

Plain-English summary

Virginia's state underpayment and overpayment interest rates were 5% for the first quarter of 2011. The federal rates were 3%, and the Virginia statute added two percentage points.

For estimated-tax additions, the 5% rate applied through April 15, 2011 for corporations and May 2, 2011 for individuals and fiduciaries with calendar-year 2010 returns.

Localities using Va. Code § 58.1-3916 could charge up to 10% for the first delinquency year and, in later years, up to the greater of 10% or the applicable federal underpayment rate. A locality charging delinquency interest also had to pay the same rate on overpayments or erroneous assessments.

What this means for you

• These figures apply only to the historical first quarter of 2011.
• Virginia's state rates moved with federal quarterly rates under the cited formula.
• Estimated-tax calculations used the bulletin's rate through the applicable return due date.
• Local tax interest followed a separate framework administered by each locality.

Citations and references

• IRC § 6621.
• Va. Code §§ 58.1-15 and 58.1-3916.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-261

Original ruling text

TAX BULLETIN 10 - 12
Virginia Department of Taxation

December 14, 2010

VIRGINIA’S FIRST QUARTER 2011 INTEREST
RATES WILL CHANGE

Federal Rates To Change: State and certain local interest rates are subject to change every quarter due to changes in federal rates established pursuant to IRC § 6621. Federal rates for the first quarter of 2011 will be 3% for tax underpayments (assessments) and 3% for tax overpayments (refunds) by taxpayers other than corporations. Virginia Code § 58.1-15 provides that underpayment rates for Virginia taxes will be 2% higher than the corresponding federal rates and overpayment rates for Virginia taxes will be 2% higher than the federal rate.

Accordingly, the Virginia rates for the first quarter of 2011 will be 5% for tax underpayments (assessments) and 5% for tax overpayments (refunds).

Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on December 31, 2010 : For the purpose of computing the addition to the tax for underpayment of Virginia estimated income taxes on Form 500C (for corporations), Form 760C (for individuals, estates and trusts), or Form 760F (for farmers and fishermen), the first quarter 5% underpayment rate will apply through the due date of the return, April 15, 2011 (for corporations) and May 2, 2011 (for individuals and fiduciaries).
Local Tax

Assessments: Localities that assess interest on delinquent taxes under Va. Code 58.1-3916 may impose interest at a rate not to exceed 10% for the first year of delinquency, and at a rate not to exceed 10% or the federal underpayment rate in effect for the applicable quarter, whichever is greater, for the second and subsequent years of delinquency. For the first quarter of 2011, the federal underpayment rate is 3%.

Refunds: Localities that charge interest on delinquent taxes are required to pay interest to taxpayers on all overpayments or erroneously assessed taxes at the same rate as they charge interest on delinquent taxes under Va. Code § 58.1-3916.
Recent Interest Rates

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Additional Information: Contact Customer Services, Virginia Department of Taxation, P. O. Box 1115, Richmond, Virginia 23218-1115, or call the following numbers for more information about interest rates and penalties.

Individual & Fiduciary Income Tax (804) 367-8031
Corporation Income Tax (804) 367-8037
Withholding Tax (804) 367-8037
Soft Drink Excise Tax (804) 786-2450
Aircraft Sales & Use Tax (804) 786-2450
Other Sales & Use Taxes (804) 367-8037

This Tax Bulletin, along with other reference documents, is available online in the Tax Policy Library section of the Department of Taxation’s website, located at www.tax.virginia.gov.
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