How to Complete and File Virginia Form 502: Pass-Through Entity Return

Virginia Form 502 is the pass-through entity return that S corporations, partnerships, and multi-member LLCs use to report Virginia-source income, pass each owner’s share through on a Schedule VK-1, and remit 5 percent withholding on nonresident owners. It’s filed electronically by the 15th day of the fourth month after the entity’s tax year closes — April 15 for calendar-year filers.¹ The entity itself usually owes no income tax on the return, but the paperwork and any nonresident withholding are still mandatory.

Who Has to File

Any pass-through entity with Virginia-source income or business activity in the state must file Form 502.¹ That covers S corporations, general and limited partnerships, and multi-member LLCs that haven’t elected C corporation treatment. Virginia follows the federal classification: if the IRS treats you as a partnership or S corp, so does Virginia.

Some entities are outside the Form 502 requirement. Single-member LLCs are disregarded, and the sole owner reports the income on their own Virginia return. Individual trusts and estates file different Virginia returns. Investment pass-through entities that meet Virginia’s definition file separately.²

The filing trigger is Virginia-source income or nexus with the state: owning or leasing property here, having employees here, or enough economic activity to establish a taxable connection. Even when the entity owes nothing, the return has to be filed so Virginia Tax can reconcile the reported figures against each owner’s individual return.

When It’s Due and How Extensions Work

The deadline is the 15th day of the fourth month after the tax year closes. Calendar-year entities file by April 15. Virginia grants an automatic six-month extension, moving the filing deadline to October 15 for calendar-year filers, and no form is required to claim it.

The extension covers filing, not payment. If nonresident withholding tax is owed, at least 90 percent of it must be paid by the original due date to avoid extension penalties.² The paperwork can wait; the money can’t.

What to Have Ready Before You Start

Pull these together first:

The entity’s Federal Employer Identification Number.
The six-digit NAICS code for the entity’s primary business activity.
The completed federal return — Form 1065 for partnerships, Form 1120-S for S corporations — because Schedule K totals for income, gains, losses, and deductions flow onto Form 502.
The accounting method used federally. Virginia requires the same method — cash, accrual, or other — that the entity uses for its federal return.¹
Each owner’s name, address, SSN or FEIN, ownership percentage, and Virginia resident or nonresident status.
Any Virginia additions or subtractions to federal income.³

Each item of income, gain, loss, or deduction keeps the character it had federally. A capital gain stays a capital gain. Special allocations from the partnership agreement are respected unless the principal purpose is Virginia tax avoidance.

What the Form Actually Does

Form 502 has two jobs: report the entity’s Virginia-source income and calculate any nonresident withholding tax due. The top section captures identification — FEIN, name, address, NAICS code, tax year. Below that, aggregate income figures come off the federal return and get allocated to Virginia.

Section 2 is where tax actually gets computed. Enter the total withholding due on nonresident owners’ shares of Virginia income, subtract estimated and extension payments already made using Form 502W, and land on a balance due or overpayment. Penalties and interest, if any, are figured in Sections 2 and 3.

One check to run before filing: the Virginia-source income totals on Form 502 should equal the sum of the amounts you report on the individual Schedule VK-1s. A mismatch between the return and the VK-1s is one of the quickest ways to trigger a processing delay or a notice.

Schedule VK-1 for Each Owner

Every owner gets a Schedule VK-1, resident or not.⁴ The schedule reports that owner’s share of Virginia-source income, Virginia additions and subtractions, tax credits, and — if the entity elects the PTE tax — the owner’s share of the PTE tax credit.

The form requires the owner’s name, mailing address, and SSN or FEIN, and breaks their share into categories: distributive or pro rata income and deductions, allocation and apportionment percentages, Virginia additions, Virginia subtractions, and nonrefundable credits.⁵ Owners use the VK-1 to complete their own Virginia individual returns, so accuracy on your end flows straight through to theirs.

Withholding on Nonresident Owners

The entity must withhold 5 percent of each nonresident owner’s share of Virginia-source taxable income.⁶ Withholding is remitted through Form 502W during the year and reconciled on the annual return.

Withholding can be skipped for certain nonresident owners:

Other pass-through entities, which are responsible for filing their own Form 502 and withholding on their own nonresident owners. If the owner-PTE tells you it won’t file a Form 502, though, you have to withhold.
Exempt organizations, where the federal income tax exemption covers their share of the PTE’s income.
Owners with no Virginia liability: individuals who had no Virginia income tax liability last year and expect none this year can claim an exemption, but they have to file a Virginia return for both years.
Owners included in a Form 765 composite return.

Any nonresident owner claiming an exemption has to give the entity a signed statement declaring the basis for the exemption under penalty of law. Keep it on file and be prepared to produce it on request. When you file Form 502, include a list of every exempt nonresident owner.⁷

Composite Return as an Alternative

Rather than have every nonresident owner file their own Virginia individual return, the entity can file Form 765, a unified nonresident composite return, on their behalf. A qualified participant is a nonresident individual who is a direct owner of the entity and whose only Virginia-source income comes from that entity.⁸ Participants don’t file separate Virginia returns for that income, and they’re exempt from the 5 percent withholding.

Each participating owner has to sign a power of attorney, kept on file rather than submitted. Form 765 is due on the same date as Form 502. Unlike Form 502, it cannot be filed electronically; the return itself and Schedule L must be mailed.

The Elective Pass-Through Entity Tax

Qualifying entities can elect to pay a 5.75 percent Virginia income tax at the entity level on Virginia taxable income attributable to eligible owners.⁹ The election is a workaround to the $10,000 federal SALT deduction cap: shifting the tax to the entity lets owners effectively deduct the full amount as a business expense federally.

The election is made on the entity’s timely filed return, including extensions, for tax years beginning on or after January 1, 2022, and before January 1, 2027. Tax year 2026 is the last year currently available unless the General Assembly extends the provision. The election is filed on a separate return, Form 502PTET, not on Form 502 itself.¹⁰ The entity can signal intent by making estimated or extension PTET payments, but the election isn’t binding until the 502PTET is filed.

Each eligible owner then gets a refundable credit on their individual Virginia return equal to their share of the PTET paid, reported on their VK-1.¹¹ The 502PTET has to be filed and processed before owners can claim the credit, so file the entity return first.

How to File and Pay

Virginia mandates electronic filing for Form 502 and its supporting schedules, for the 502V and 502W withholding forms, and for 502PTET if the entity has elected in.¹² An entity that can’t file electronically because of a specific hardship can request a waiver.

Three free filing channels are available through Virginia Tax:

eForms, fillable electronic forms submitted directly through the Virginia Tax site with no login required.
A Business Online Services Account, a question-based filing system requiring a login, the entity’s FEIN, its 15-digit Virginia Tax account number, and information from the most recently filed Virginia return.
Web Upload, a bulk-filing portal for submitting data files, with its own login.

Approved commercial tax software is also accepted and is often the practical choice for entities with complex returns or multi-state activity.¹³

Withholding tax owed with the return can be paid through any of the electronic filing systems, drawn directly from a bank account at no charge. Businesses can also initiate ACH credit payments from their own bank to Virginia Tax’s account, though the sending bank may charge a fee. If paying by check or money order, make it payable to the Virginia Department of Taxation and write the entity’s FEIN and the tax period on the payment.

Penalties for Filing or Paying Late

Three separate penalties apply to Form 502, and more than one can hit the same return:²

Extension penalty: applies when less than 90 percent of the withholding tax is paid by the original due date. 2 percent per month or partial month until the return is filed, capped at 12 percent.
Late payment penalty: applies when tax isn’t paid in full at the time the return is filed. 6 percent per month or partial month until paid, capped at 30 percent.
Late filing penalty: if the return goes in after the six-month extended due date, the extension provisions no longer apply and the entity faces a flat $1,200 penalty.¹⁴

When a return is filed during the extension window but the tax isn’t fully paid, the extension penalty and the late payment penalty can stack.

Amending a Return

To correct a filed Form 502, file another Form 502 with the amended box marked in the heading — there is no separate amended form. Complete the entire return, not just the changed lines. Virginia Tax accepts electronic amended Form 502 filings for the current tax year and the two preceding years; earlier years have to be mailed.

If the amendment changes any owner’s share of income, deductions, or credits, issue corrected VK-1s to those owners so they can amend their own Virginia returns. Fixing the entity return without updating the VK-1s leaves a mismatch that the Department will eventually catch.

1
Virginia Department of Taxation. Instructions for Preparing 2025 Form 502
2
Virginia Tax. Pass-Through Entities
3
Virginia Code Commission. Virginia Code 58.1-391 – Virginia Taxable Income of Owners of a Pass-Through Entity
4
Virginia Department of Taxation. Instructions for Preparing 2023 Form 502 – Section: Instructions for Schedule VK-1
5
Virginia Department of Taxation. Virginia Form 502 Schedule VK-1
6
Virginia Department of Taxation. 2020 Form 502W – Pass-Through Entity Withholding Tax Payment
7
Virginia Department of Taxation. Guidelines for Pass-Through Entity Withholding
8
Virginia Department of Taxation. Instructions for Preparing 2024 Form 765
9
Virginia Code Commission. Virginia Code – Article 9 Taxation of Partnerships – Section 58.1-390.3
10
Virginia Tax. Elective Pass-Through Entity Tax Guidelines
11
Virginia Department of Taxation. Virginia Elective Pass-Through Entity Tax 2025 Form 502PTET Instructions
12
Virginia Tax. Electronic Filing Requirements
13
Virginia Tax. Business Tax Payment Options
14
Virginia Department of Taxation. 2025 Form 502