Virginia Addition to Tax for Underpayment: Form 760C

Virginia Form 760C is the worksheet individuals, estates, and trusts use to calculate the addition to tax owed when withholding and quarterly estimated payments didn’t cover enough of the year’s Virginia income tax. The charge functions like interest on the money the state should have received each quarter, and it attaches to your Form 760 when you file. You can often sidestep it by meeting one of Virginia’s safe harbors.

Who Has to File Form 760C

You’re required to file Form 760C if your Virginia income tax liability, after subtracting the Spouse Tax Adjustment and tax credits, is more than $150.¹ Below that amount, no addition applies regardless of how you paid.

Read the threshold carefully. It looks at your tax liability before accounting for withholding and estimated payments. A $200 tax liability with $180 in withholding still clears the $150 mark, even though only $20 is owed at filing. Most people with only W-2 wages and adequate withholding never trigger the form. It typically becomes relevant when you have self-employment income, investment gains, rental income, or other earnings without automatic withholding.

Virginia’s Quarterly Due Dates

Virginia splits the year into four installment periods, and the dates don’t match the federal schedule:

First quarter: May 1
Second quarter: June 15
Third quarter: September 15
Fourth quarter: January 15 of the following year

Each installment has to cover a proportionate share of your expected annual tax.² Timing matters as much as the total. Paying your full balance by the April filing deadline doesn’t erase a shortfall from an earlier quarter, because Virginia checks each period separately.

How the Addition to Tax Is Calculated

The addition is not a flat penalty. It accrues like interest on each quarter’s underpayment, for as long as that underpayment lasted. The rate equals the federal underpayment rate under IRC Section 6621 plus two percentage points, and it can change every quarter.³

For 2026, the Virginia underpayment rate began at 9% for the first quarter and dropped to 8% for the second.⁴⁵ A first-quarter shortfall and a third-quarter shortfall can accrue at different rates. Form 760C walks you through applying the correct rate to each period’s underpaid amount.

Ways to Avoid the Addition

Virginia offers several exceptions, each evaluated at each installment period rather than only at year-end.

The 90% Current-Year Safe Harbor

The most common protection is paying at least 90% of your current year’s tax liability through withholding and timely estimated payments.² Hit that mark for each installment period and no addition applies.

The Prior-Year Safe Harbor

You’re also safe if your payments for each installment period equal or exceed the tax shown on your prior year’s return, provided that return covered a full 12 months and showed a liability.² This is especially useful when income jumps. Earn $50,000 last year and $90,000 this year, and basing estimated payments on last year’s tax keeps you penalty-free. Unlike the federal rule, Virginia does not raise the threshold to 110% for higher-income taxpayers. The 100% figure applies at every income level.¹

The Annualized Income Exceptions

If your income arrives unevenly (a large capital gain in November, a seasonal business, freelance work with uneven months), the quarter-by-quarter calculation can treat you unfairly. Form 760C provides two annualized income exceptions.

Exception 3 takes your actual income for the first four, five, and eight months of the year, multiplies it by annualization factors to project a full-year figure, then checks whether your payments covered 90% of the tax on that projected income for each period.¹ Exception 4 is simpler: it looks at whether your payments equaled or exceeded 90% of the tax on your actual income for those same partial-year periods, without annualization. Both exceptions apply only to the first three installment periods. The fourth quarter can’t use the annualized method.

These calculations require careful records of exactly when income was received, not just annual totals.

Waivers for Unusual Circumstances

The Department of Taxation can waive the addition when an underpayment resulted from a casualty, disaster, or other extraordinary event such as fire, serious illness around a due date, or a natural disaster. Penalties of $2,000 or less are eligible for forgiveness when extenuating circumstances prevented timely payment.³ Keep documentation of whatever caused the delay to support your claim.

Farmers, Fishermen, and Merchant Seamen Use a Different Form

If at least two-thirds of your gross income comes from farming, fishing, or working as a merchant seaman, you can skip the quarterly installment schedule entirely. File your return and pay all tax due by March 1 of the following year, and no addition applies.¹ Taxpayers who meet both the income test and the March 1 deadline don’t need to file Form 760C at all. If you meet the income test but miss March 1, use Form 760F instead of 760C to calculate any addition.⁶

Working Through the Form

Before you start, gather your final tax liability from Form 760, the total Virginia income tax your employers withheld, every estimated tax payment you made with its exact date, and your prior year’s total tax figure. Form 760C is available on the Virginia Department of Taxation website.

The form moves in a logical sequence. You enter total income tax after credits. You then determine the required annual payment by comparing 90% of the current year’s tax against the prior year’s total liability; the required payment is the lesser of the two. That annual figure is divided by four to set each quarter’s required installment.

Next, record the actual payments made by each due date (May 1, June 15, September 15, and January 15) and compare them against the required installments to identify shortfalls.² For any quarter where you fell short, the form applies the applicable interest rate to the underpaid amount for the number of days the underpayment lasted. The total addition across all quarters transfers to the appropriate line on your Form 760.

If you think the annualized income exceptions or the prior-year safe harbor cover you, work through the separate sections for Exceptions 1 through 4.¹ Many taxpayers who appear to owe an addition discover they’re covered by one of them.

Attach the completed 760C to your Form 760 when you file. Electronic filing through Virginia Tax handles both at once; on paper, mail them together.

What Form 760C Does Not Cover

The 760C addition is a separate charge from Virginia’s late filing penalty, late payment penalty, and extension penalty, which address a different problem: not filing or not paying at the end of the year. You can owe the 760C addition even when you filed on time and paid your full balance by the deadline, because the question it asks is whether you paid enough during each quarter of the year. A six-month filing extension doesn’t change that; the extension gives you more time to file paperwork, not more time to pay.³

1
Virginia Tax. 2025 Instructions for Form 760C – Underpayment of Virginia Estimated Tax by Individuals, Estates, and Trusts
2
Virginia Department of Taxation. Individual Estimated Tax Payments
3
Virginia Department of Taxation. Penalties and Interest
4
Virginia Department of Taxation. Tax Bulletin 25-7
5
Virginia Department of Taxation. Virginia Interest Rates Change for the 2nd Quarter of 2026
6
Virginia Tax. 2025 Form 760F – Underpayment of Virginia Estimated Tax by Farmers, Fishermen, and Merchant Seamen