TAX BULLETIN 23-7
Virginia Department of Taxation
September 8, 2023
VIRGINIA'S INTEREST RATES WILL CHANGE FOR THE FOURTH QUARTER OF 2023
Federal Rates Increased: State and certain local interest rates are subject to change every quarter due to changes in federal rates established pursuant to Internal Revenue Code (“IRC”) § 6621. IRC § 6621 dictates that the federal underpayment and overpayment rates are three percentage points higher than the federal short-term rate. Federal rates for the fourth quarter of 2023 will be 8% for tax underpayments (assessments) and 8% for tax overpayments (refunds) by noncorporate taxpayers.
Virginia Code § 58.1-15 provides that the underpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate and the overpayment rate for Virginia taxes will be 2% higher than the federal overpayment rate for noncorporate taxpayers. Accordingly, the Virginia rates for the fourth quarter of 2023 will 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, 2023: 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 16, 2024.
Reduced Rate for Certain Assessments in Dispute
For administrative appeals filed with the Department of Taxation on or after July 1, 2011, a reduced interest rate equal to the federal short-term rate established pursuant to IRC § 6621(b) applies, beginning nine months after the date of assessment until a determination is issued. The federal short-term rate established pursuant to IRC § 6621(b) for the fourth quarter of 2023, rounded to the nearest whole percent, is 5%. Accordingly, the reduced rate for the fourth quarter of 2023 for qualifying assessments in dispute is 5%.
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 2023, 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 (Refund) |
Underpayment (Assessment) |
Reduced Rate |
|
Beginning |
Through |
|||
1-Jan-08 |
31-Mar-08 |
9% |
9% |
- |
1-Apr-08 |
30-Jun-08 |
8% |
8% |
- |
1-Jul-08 |
30-Sept-08 |
7% |
7% |
- |
1-Oct-08 |
31-Dec-08 |
8% |
8% |
- |
1-Jan-09 |
31-Mar-09 |
7% |
7% |
- |
1-Apr-09 |
31-Dec-10 |
6% |
6% |
- |
1-Jan-11 |
31-Mar-11 |
5% |
5% |
- |
1-Apr-11 |
30-Sept-11 |
6% |
6% |
- |
1-Oct-11 |
31-Mar-16 |
5% |
5% |
0% |
1-Apr-16 |
31-Mar-18 |
6% |
6% |
1% |
1-Apr-18 |
31-Dec-18 |
7% |
7% |
2% |
1-Jan-19 |
30-Jun-19 |
8% |
8% |
3% |
1-Jul-19 |
30-Jun-20 |
7% |
7% |
2% |
1-Jul-20 |
31-Mar-22 |
5% |
5% |
0% |
1-Apr-22 |
30-Jun-22 |
6% |
6% |
1% |
1-Jul-22 |
30-Sept-22 |
7% |
7% |
2% |
1-Oct-22 |
31-Dec-22 |
8% |
8% |
3% |
1-Jan-23 |
30-Sept-23 |
9% |
9% |
4% |
1-Oct-23 |
31-Dec-23 |
10% |
10% |
5% |
Additional Information: This Tax Bulletin, along with other reference documents, is available online in the Laws, Rules and Decisions section of the Department’s website, located at www.tax.virginia.gov. If you have questions about interest rates, please visit Virginia Tax’s website or contact the Department at 804.367.8031 (for individuals), 804.786.2450 (for Soft Drink Excise Tax and Aircraft Sales and Use Tax), or 804.367.8037 (for all other business taxes).