Penalties and Interest for Individuals

Penalties

Why We Assess Penalties

  • Most individual income tax returns are due May 1.
  • We provide an automatic 6-month filing extension, but this extension does not apply to the payment of taxes you owe.
  • We can assess penalties if there is an unpaid balance on your return. 

Types of Penalties

By understanding the different types of penalties and how to prevent them, you can avoid paying more than you must.

Extension Penalty 

Extension Penalty Rate:

  • 2% per month or partial month
  • Maximum penalty of 12% of the tax due

If you file your return within 6 months of the original due date, but pay less than 90% of what is owed, we charge an extension penalty.

The extension penalty

  • is assessed on the balance of tax owed
  • is assessed from the original due date until the date your return is filed
  • is assessed on full and partial months

If you file your return within 6 months of the original due date but do not pay the tax due until after the return is filed

  • the extension penalty will apply for the period of the extension
  • the late payment penalty will apply for the remainder of the period for which the tax is unpaid even if the tax is paid within 6 months of the original due date

If you file your return more than 6 months after the due date

  • the automatic extension rule will not apply
  • the return will be subject to the late filing penalty on any balance of tax due
Late Payment Penalty

Late Payment Penalty Rate:

  • 6% per month
  • Maximum penalty of 30%.

If you file your return within 6 months of the due date but pay the tax due after that time, we may charge a late payment penalty. 

The late payment penalty

  • will not be assessed in any month for which a late filing penalty has also been assessed. (You will pay a late payment penalty or a late filing penalty, not both.)
  • is generally not assessed when an additional balance is the result of an audit, and the tax return was filed in good faith

It is possible for a return to be subject to both the late payment penalty and the extension penalty.

Example: Combined Extension/Late Payment Penalty Assessment
Linda's individual income tax return was due to be filed on May 1. She filed on July 15, which was within six months from the original due date, but she did not pay the tax due of $2,000 until July 25. The tax due was more than 10% of her total tax liability for the year, so the return is subject to the extension penalty for May, June and part of July. Because Linda failed to pay the tax due by the date her return was filed, a late payment penalty will also be imposed for the remainder of July. 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 also applies to any balance of tax due that is not paid by the original due date of a return, even if the return is filed under extension and/or is not subject to an extension penalty.

Late Filing Penalty

Late Filing Penalty Rate

  • 6% per month or part of month from the due date of the return until the return is filed
  • Maximum penalty of 30%.

If you file your return more than 6 months after the due date and you owe tax, we may charge a late filing penalty. 

Because the late filing penalty is not applied unless the return is filed over 6 months after the original due date, it will always reflect the maximum penalty.

Interest

Interest Rate:

  • The federal underpayment rate established under Internal Revenue Code Section 6621, plus 2%. 
  • For the current daily interest rate, contact us.

Virginia law requires us to assess interest. We add interest charges to 

  • extension penalties
  • late payment penalties
  • late filing penalties 
  • late payments
  • additional balances due to amended returns
  • additional balances due to audit adjustments
  • the unpaid balance of any bill more than 30 days old

Interest is assessed from the due date for payment through the date the tax is paid. 

Remove or Reduce a Penalty

If extenuating circumstances kept you from filing your return or paying your tax on time, you can ask for help.
See Reduce or Remove a Penalty [revised name for OIC page] to learn more.

Civil and Criminal Penalties

In addition to the penalties discussed above, you can also face civil and criminal penalties under Virginia law. 

Civil penalties:

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. 

Criminal penalties:

Criminal penalties for fraud and failure to file can include imprisonment for up to one year, a fine of up to $2,500, or both.