Virginia Withholding laws & HR compliance analysis

Virginia Withholding: What you need to know

Virginia law requires withholding of state income taxes from the wages of residents and nonresidents.
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Nonresident employees who commute on a daily basis from the District of Columbia or Kentucky are not subject to taxation. Additionally, residents of Maryland, Pennsylvania, or West Virginia who are employed in Virginia but are taxed in their home states are not subject to Virginia taxes. Employees covered by these reciprocity agreements must indicate this on Form VA-4.
Taxes must be withheld on “wages,” which include all cash and noncash payments for services performed by an employee. Virginia withholding law generally parallels federal law. The state tax code generally conforms to the Internal Revenue Code.
Exclusions. In addition to the federal exemptions, Virginia also excludes these payments from withholding (VA Code Sec. 58.1-460):
• Payments for certain filming activities conducted for less than 90 days;
• Payments from an individual retirement account or simplified employee pension; and
• Payments made to certain nonresident transportation employees.
Registration. Employers must register with the Department of Taxation before the first withholding payment is due. Registration may be done online at or on paper by filing Form R-1, Business Registration Form.
Employee exemptions. Employers must obtain a Form VA-4 from each employee showing the number of exemptions the employee is claiming. Employees eligible for out-of-state tax credits on their Virginia income tax should file Form VA-4B (Virginia Employee's Credit for Income Taxes Paid to Another State) each year. Employees who had no tax liability in the preceding year and ...

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