Was a Virginia corporate income tax return filed on Monday, October 17 timely when its extended October 15 deadline fell on a Saturday?

Subject

Timely filed return; Late filing penalty and associated interest abated

Plain-English summary

A corporation received an extension for its 2004 Virginia corporate income tax return and paid estimated tax. After a Department audit identified an ongoing issue for earlier years, the corporation corrected that issue on its 2004 return, paid the remaining liability, and filed the return on Monday, October 17, 2005.

The Department had denied the extension and imposed a late-filing penalty because the stated extended deadline was October 15. But October 15 was a Saturday. Va. Code § 58.1-8 allowed the return to be filed on the next business day, making the October 17 filing timely. Virginia therefore abated the late-filing penalty and associated interest.

The Department also found that the corporation had computed and paid the correct estimated-tax underpayment addition when it filed. It abated the later assessment of that addition and its associated interest and stated that a refund would issue.

What this means for you

• When a Virginia filing deadline falls on a Saturday, Sunday, or legal holiday, the next business day can be timely under Va. Code § 58.1-8.
• A timely extension payment does not by itself resolve every penalty question; the actual extended filing deadline still matters.
• If an assessment duplicates an underpayment addition already correctly calculated and paid with the return, the taxpayer should document that payment and calculation.

Citations and references

• Va. Code § 58.1-8, filing on the next business day after a weekend or legal holiday.
• Va. Code § 58.1-450, penalty for failing to timely file a corporate income tax return.
• Va. Code § 58.1-504, addition to tax for underpayment of estimated tax.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-54

Original ruling text

May 4, 2007

Re: § 58.1-1821 Application: Corporate Income Tax

Dear *:

This is in response to your correspondence in which you request the abatement of a late payment penalty included in the assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2004.

In April 2005, the Taxpayer was granted an extension to file its 2004 Virginia corporate income tax return. In accordance with its extension request, the Taxpayer paid its estimated corporate income tax for 2004. During 2005, the Department audited the Taxpayer for the 2001 through 2003 taxable years. A final audit report was issued to the Taxpayer in July 2005.

On October 17, 2005, * filed its 2004 corporate income tax return, which included a correction for an ongoing issue identified in the audit of the 2001 through 2003 taxable years. The Taxpayer paid the remainder of its tax liability, including the increase in tax resulting from the audit findings. The Department assessed the Taxpayer an addition to tax for the underpayment of estimated tax, a late filing penalty, and interest. The Taxpayer has requested that the late payment penalty be abated.

Virginia Code § 58.1-504 provides for an "addition to tax" (commonly called the "underpayment penalty") in the event of an underpayment of estimated tax. In this case, a review of the 2004 return reveals that the Taxpayer computed and paid the correct amount of the underpayment penalty when the return was filed. Accordingly, the assessment for the underpayment penalty and associated interest will be abated.

Pursuant to Va. Code § 58.1-450, when a corporation fails to timely file an income tax return, a penalty is assessed on the tax due with the return at a rate of 6% per month or fraction thereof, from the due date of the return, including extensions, until the date the return is filed. The Taxpayer filed an extension and a payment prior to the due date of the 2004 return. The extension was denied because the 2004 return was not timely filed by October 15, 2005.

October 15, 2005 was a Saturday. Virginia Code § 58.1-8 provides that if the last day on which a tax return may be filed is a Saturday, Sunday, or legal holiday, the return may be filed on the next succeeding business day. As such, the extended due date for the 2004 return was the next succeeding business day, or Monday, October 17, 2005. The Taxpayer timely filed its return; therefore, the late filing penalty and associated interest will be abated.

The assessment will be abated and a refund will be issued shortly. The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this letter, please contact * in the Office of Policy and Administration, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1040182907B