Payroll tax in Virginia: What employers need to know [2024]

For businesses operating in the United States, navigating the complexities of payroll tax isn't limited to just federal mandates—individual states, like Virginia, have their own set of requirements.

Located along the country's East Coast, Virginia stands as a unique crossroads of history, commerce, and taxation. Compared to the federal framework, Virginia's payroll tax landscape presents its own nuances, with some processes appearing simpler and others more complex.

Throughout this guide, we'll walk employers through Virginia state's specific payroll tax regulations, ensuring you're well-equipped to tackle both "Old Dominion" laws and the overarching federal obligations. Whether you're a small business owner in Richmond, a tech start-up in Arlington, or a historical inn in Williamsburg, understanding Virginia's payroll tax is essential. Let's delve into the details and provide clarity on Virginia's tax tapestry.

The 5 Virginia state payroll taxes

When it comes to administering payroll taxes in Virginia, the primary governing body is the Virginia Department of Taxation. This agency is responsible for ensuring that employers across the state are compliant with tax obligations and that revenues are appropriately collected.

In Virginia, employers play a crucial role in withholding and remitting state payroll taxes. The obligation to manage these taxes typically begins from the moment an employer hires their first employee, aligning with both their federal income tax and Virginia state tax responsibilities.

Virginia, distinct from states like California, has five primary types of payroll taxes that employers must remain cognizant of:

1. State Income Tax Withholding: This is deducted directly from employees' paychecks and remitted to the state.
2. Unemployment Tax (State Unemployment Insurance): Managed by the Virginia Employment Commission, this tax assists unemployed individuals.
3. Virginia FUTA Tax (Federal Unemployment Tax Act): This is a federal tax that works in tandem with state systems across the country.
4. Local Taxes: Some localities in Virginia have additional payroll-related taxes.
5. Virginia Workers’ Compensation Insurance: Mandatory for most employers, this insurance provides coverage for employees who experience work-related injuries or illnesses.

Each of these taxes comes with its own set of regulations, guidelines, and rates, which we'll delve into in the following sections. By ensuring compliance, Virginia employers not only safeguard their businesses but also contribute significantly to the state's revenue and community support mechanisms.

State Income Tax Withholding

Virginia State Income Tax Withholding is an essential component of payroll taxes in Virginia. It pertains to the portion of an employee's wages that employers deduct and remit to the Virginia Department of Taxation. This withholding acts as a prepayment of state income taxes and helps ensure that employees are meeting their tax obligations throughout the year rather than facing a large bill come tax season.

This withholding process requires employers to be vigilant about any changes in state tax laws, ensuring that their employees' withholdings match the current Virginia tax rates and withholding tables.

Unemployment Tax (State Unemployment Insurance)

This is the state-level unemployment insurance tax that employers pay to the state of Virginia. This tax goes into the state's unemployment fund, which provides benefits to workers who have lost their jobs due to no fault of their own.

Virginia FUTA Tax (Federal Unemployment Tax Act)

This is a federal tax that employers pay to the federal government. FUTA, alongside state unemployment systems, provides unemployment compensation to workers who have lost their jobs. While FUTA is federally mandated, states can have a credit that reduces the FUTA rate if the state's unemployment system is in good standing.

Payroll tax due dates in Virginia

Managing payroll is crucial, but so is staying on top of the due dates. Virginia, much like other states, has specific timelines for payroll tax submissions, and missing these deadlines can lead to penalties. Here are the primary due dates Virginia employers need to know:

• State Income Tax Withholding:
• Quarterly Filers: Due the last day of the month following the close of the quarter (April 30th, July 31st, October 31st, and January 31st).
• Monthly Filers: Due on or before the 25th of the succeeding month.
• Semi-weekly Filers: Due within three banking days after the end of a semi-weekly period.
• Unemployment Tax: 
• Due by the last day of the month following the close of each quarter. This translates to April 30th, July 31st, October 31st, and January 31st.
• Local Taxes:
• These can vary by locality, but many follow the state's quarterly schedule. It's vital to check with the specific county or city tax office.
• Virginia Workers’ Compensation Insurance:
• Premium payments depend on your agreement with the insurance provider. Some might be monthly, quarterly, or annually.

Penalty for Late Payments:

 In Virginia, late payment of payroll taxes can result in penalties that range from a percentage of the unpaid tax for each month it's late up to a maximum percentage, plus interest. The precise penalty can vary based on how late the payment is and which specific tax is involved. It's always best to ensure you're on time to avoid these extra costs and potential complications with the Virginia Department of Taxation.

How to submit payroll taxes in Virginia

Navigating the complex landscape of payroll taxes is one challenge; understanding how to correctly submit these taxes in Virginia is another. As we shift gears from understanding what payroll taxes exist to how to manage their submission, we find several methods suitable for different business needs. Let's explore these avenues:

Online through the Virginia Department of Taxation’s website

Businesses can use the Virginia Department of Taxation's online portal for tax filing and payments. This system streamlines the process and ensures that businesses comply.

• Convenience: You can avoid paperwork and mail delays
• Accuracy: Built-in calculators ensure you’re paying the correct amount
• IRS Alignment: The system has been designed in consultation with the IRS to match federal standards
• Tax Calculator Tool: An integrated tax calculator ensures correct computations for both state and federal income tax
• Form VA-4 and Form W-4 Assistance: The portal aids employers in understanding and processing these specific forms

Electronic Funds Transfer (EFT)

For those who prioritize swift and secure transactions, the EFT method is ideal:

• Direct debit from the bank account
• Automated processing, reducing errors
• Preferable for businesses with a high volume of transactions or larger tax liabilities

Mailing Physical Checks or Forms

Traditional mail is still an option for businesses that prefer it. However, it's essential to be aware of due dates to avoid penalties:

• Address Accuracy: Ensure that forms are sent to the correct Virginia Department of Taxation address or relevant local tax authority
• Include Relevant Forms: Attach any necessary forms, such as Form VA-4, for withholding specifics
• Cross-State Awareness: If you’re also operating in neighboring states like Maryland, Pennsylvania, West Virginia, or Washington, DC, be aware that you might need to manage multiple state tax submissions

Virginia Employment Commission

For unemployment taxes, Virginia employers may deal directly with the Virginia Employment Commission:

• Wage Base Details: The commission provides specifics on the wage base for unemployment tax
• New Employer Information: As a new employer in Virginia, you may have an initially determined tax rate, which will change over time based on your experience with layoffs and the unemployment fund
• Gross Pay Considerations: Ensure that you’re aware of what constitutes gross pay and the nuances around it for accurate tax computations

Local Tax Office

For specific local taxes or if personal interaction is preferred:

• Visit your local county or city tax office
• Obtain and fill in the necessary forms, often available on-site
• Personalized assistance and immediate confirmation of submission

Rippling’s Full-Service Payroll Software

Looking for an even easier payment option? Rippling’s payroll software is powerful, and it practically runs itself. It can be especially useful for businesses operating across multiple states, including Maryland, New York, Kentucky, and Pennsylvania, providing accurate paycheck calculator functionalities. Dive deeper into what Rippling’s payroll software can offer your Virginia-based business:

• Automate Compliance: Rippling automates all your compliance work and files your taxes
• Cross-State Operations: Manage payroll taxes seamlessly, even if your business operates across states
• Virginia Paycheck Specifics: Ensure your Virginia employees' paychecks are calculated correctly, including Medicare tax considerations

FAQs about Virginia payroll taxes

Are there local tax laws in Virginia?

Yes, certain localities in Virginia have additional payroll-related taxes. Employers and businesses should be mindful of these local laws, especially when operating in multiple cities or counties in the state. Additionally, those operating near Washington, DC need to be wary of inter-state tax considerations.

Can your tax returns be audited in Virginia?

Absolutely. Both the Virginia Department of Taxation and local tax authorities have the right to audit your tax returns. Regular compliance and accurate record-keeping can help ensure you're prepared if an audit takes place.

Are nonprofit organizations subject to payroll taxes in Virginia?

Generally, nonprofit organizations in Virginia are exempt from certain taxes. However, they still might be responsible for withholding state income tax from employees' paychecks. It's always advisable for nonprofits to consult with a tax professional about specific exemptions and obligations.

How are new hire reporting obligations met in Virginia?

Virginia employers are required to report new hires to the Virginia New Hire Reporting Center. This assists in locating non-custodial parents for child support enforcement purposes.

What is the role of the Virginia Employment Commission regarding payroll taxes?

The Virginia Employment Commission is responsible for managing the state's unemployment insurance program. They determine tax rates, collect unemployment taxes, and offer resources to employers.

Is there a difference between FICA taxes and Virginia payroll taxes?

Yes. FICA taxes cover federal Social Security and Medicare contributions, while Virginia payroll taxes cover state-specific obligations like state income tax withholding and unemployment tax.

What considerations are there for small business payroll tax in Virginia?

Small businesses in Virginia need to be aware of their responsibilities concerning state income tax withholding, unemployment tax, local taxes, and any applicable tax credits or exemptions. Utilizing resources like Rippling or consulting with local tax professionals can offer tailored guidance. For those expanding from or into neighboring states like Kentucky or New York, it’s essential to stay updated on tax regulations unique to each state.

Are there different tax brackets or rates for varying filing statuses in Virginia?

Yes, Virginia has different income tax rates based on your taxable income and filing status. It's essential to consult the Virginia Department of Taxation or withholding tables to ensure accurate withholding from employees' paychecks.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.