Tax Type
Declaration of Estimated Income Tax by Individuals
Individual Income Tax
Description
Penalty for underpayment of estimated tax
Topic
Penalties and Interest
Date Issued
08-01-1990
August 1, 1990
Re: §58.1-1821 Application/Individual Income Tax
Dear ****
This will respond to your letter of May 29, 1990 requesting abatement and refund of an estimated tax underpayment penalty submitted with your 1989 Virginia Individual Income Tax Return.
FACTS
The Taxpayer retired from the federal government in July 1989 and elected to take lump sum distributions, 60% in 1989 and 40% in 1990, of her retirement benefits. She did not anticipate the additional tax liability this distribution presented and thus failed to make adequate estimated payments to Virginia, resulting in a penalty for the underpayment of tax. She requests a refund of this penalty.
DETERMINATION
Virginia Code §58.1-490 requires individuals to make estimated tax payments for every taxable year if their tax liability can reasonably be expected to exceed an amount to be determined under regulations promulgated by the Tax Commissioner. Declarations of estimated tax are required to be filed on or before May 1 of each year if Virginia estimated tax liability will exceed withholding and tax credits by more than $150 and may be amended at a later date to reflect any increase or decrease anticipated in the year's tax liability.
In the event an individual makes an underpayment of estimated taxes, a penalty is required under Virginia Code §58.1-492 (copy enclosed), unless one of the four exceptions listed in subsection C voids the addition of penalty. Since the Taxpayer did not have enough tax withheld or pay any estimated tax, the penalty required under Virginia Code §58.1-492 is applicable. However, the Taxpayer's penalty may be less if computed under Part IV, Exception 4 of Form 760C. Thus, you may be entitled to a partial refund of the penalty previously paid. If this is the case, please forward your revised Form 760C to the department's Technical Services Section, office Services Division, P.O. Box 6-L, Richmond, Virginia 23282. A Form 760C and an instruction sheet are enclosed for your convenience.
If you have any questions about this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner