What Virginia tax underpayment and refund interest rates applied during the fourth quarter of 2007?

Subject

Fourth Quarter Interest Rates Unchanged 2007

Plain-English summary

Virginia kept both state tax-underpayment and tax-overpayment interest at 10% for the fourth quarter of 2007. The corresponding federal rates were 8%, and Virginia law added two percentage points.

For taxpayers whose taxable year ended September 30, 2007, the 10% fourth-quarter underpayment rate applied through the January 15, 2008 return due date when computing additions for underpaid estimated tax.

The bulletin also described local rules. Localities could charge no more than 10% in the first delinquency year and, in later years, no more than the greater of 10% or the applicable federal underpayment rate. A locality charging delinquency interest had to pay the same rate on overpayments or erroneous assessments.

What this means for you

• Use 10% for the historical fourth-quarter 2007 Virginia state assessment and refund rate.
• Apply the bulletin's estimated-tax rule only to the specified September 30, 2007 year-end.
• Check the exact quarter and local ordinance for local-tax interest.
• Do not use these historical rates for a current balance or refund.

Citations and references

• IRC § 6621.
• Va. Code § 58.1-15 and § 58.1-3916.
• Virginia Tax Bulletin 07-8.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-149

Original ruling text

TAX BULLETIN 07-8
Virginia Department of Taxation
September 17, 2007

VIRGINIA’S FOURTH QUARTER 2007 INTEREST
RATES UNCHANGED

Federal Rates Unchanged: State and certain local interest rates are subject to change every quarter based on changes in federal rates established pursuant to IRC § 6621. The federal rates for the fourth quarter of 2007 will continue to be 8% for tax underpayments (assessments) and 8% for tax overpayments (refunds) by taxpayers other than corporations. Va. Code § 58.1-15 provides that the 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 fourth quarter of 2007 will continue to be 10% for tax underpayments (assessments) and 10% for tax overpayments (refunds).

Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on September 30, 2007 : 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 fourth quarter 10% underpayment rate will apply through the due date of the return, January 15, 2008.
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 fourth quarter of 2007, the federal underpayment rate is 8%.

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

Accrual Period Overpayment Underpayment
Beginning Through ( Refund) (Assessment)
1-Jan-00 31-Mar-00 10% 10%
1-Apr-00 31-Mar-01 11% 11%
1-Apr-01 30-Jun-01 10% 10%
1-JuI-01 31-Dec-01 9% 9%
1-Jan-02 31-Dec-02 8% 8%
1-Jan-03 30-Sep-03 7% 7%
1-Oct-03 31-Mar-04 6% 6%
1-Apr-04 30-Jun-04 7% 7%
1-Jul-04 30-Sep-04 6% 6%
1-Oct-04 31-Mar-05 7% 7%
1-Apr-05 30-Sep-05 8% 8%
1-Oct-05 30-Jun-06 9% 9%
1-Jul-06 30-Jun-07 10% 10%

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

In addition, this Tax Bulletin along with other reference documents are available online in the Tax Policy Library section of the Department of Taxation’s web site, located at www.tax.virginia.gov.
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