What Is Form 760C? Virginia Underpayment Charge and Waivers

Virginia Form 760C is the worksheet the state uses to figure out whether you owe an addition to tax for underpaying your income tax during the year. Virginia runs a pay-as-you-go system, so when your withholding and estimated payments fall short of what your return says you owed, this form calculates an interest-based charge on each quarterly shortfall. The rate is .00025 per day, which comes out to 9% a year, and it runs from each installment’s due date until that installment is paid or until May 1 of the following year, whichever happens first.¹

The name sounds punitive, but the addition to tax is really an interest charge for the months the state didn’t have money it was entitled to. It’s computed separately for each of the four installment periods, so you might owe it for one quarter and not another.²

Who Has to File Form 760C

You need to file the form if your underpayments across all four installment periods add up to more than $150. If the total is $150 or less, you don’t owe the addition to tax and don’t need to send the form. You also don’t need to file it if your income tax liability, after the Spouse Tax Adjustment and tax credits, comes to $150 or less for the year.²

Form 760C covers individuals, estates, and trusts. It gets attached to whichever Virginia return you file:

Form 760, the resident individual return
Form 760PY, the part-year resident return
Form 763, the nonresident return for Virginia-sourced income
Form 770, the fiduciary return for estates and trusts

The Four Installment Due Dates

Virginia’s quarterly estimated payment deadlines don’t line up with the federal schedule, because the state’s filing deadline is May 1 rather than April 15.³ The four installment due dates are:

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

If one of these dates falls on a weekend or legal holiday, the deadline moves to the next business day.⁴ Form 760C measures each payment against the installment it was supposed to cover.

How to Avoid the Addition to Tax

Virginia gives you two general safe harbors. Meet either one and you owe nothing on Form 760C.

Your withholding and estimated payments cover at least 90% of your total tax liability for the current year.
Your payments equal or exceed 100% of the tax shown on your prior-year return. Your prior year has to have covered a full twelve-month tax year and shown an actual tax liability for this one to apply.²

Unlike the federal rules, Virginia doesn’t bump the prior-year threshold up to 110% for higher-income filers. It stays at 100% regardless of income.¹

Beyond the safe harbors, the form itself lists four numbered exceptions. Qualifying under any of them for a given installment period eliminates the addition to tax for that period.

Exception 1: Your payments for each installment period equal or exceed your prior year’s tax liability. This is the 100% safe harbor applied installment by installment.
Exception 2: Your payments equal or exceed what you would have owed if last year’s income were recalculated using this year’s rates and personal exemptions. You don’t need to have filed a Virginia return or had a Virginia tax liability for the prior year to use this one.
Exception 3: Your payments equal or exceed 90% of the tax computed on annualized income for each installment period. This is the exception that matters most for seasonal, freelance, or commission-based income, and it uses annualization factors applied to income received in the first four, five, and eight months of the year.
Exception 4: Your payments equal or exceed 90% of the tax computed on actual income received during the first four, five, and eight months of the year.

Exceptions 3 and 4 require month-by-month income breakdowns and their own worksheets, which is where the form gets its reputation for being fiddly. If you use either one, you have to enclose the form and the worksheets with your return even if the result is zero addition to tax.⁵

How the Charge Is Calculated

For each installment where you underpaid, Virginia counts the days from the installment due date to either the date you paid or May 1 of the following year, whichever is earlier. That day count is multiplied by the underpaid amount and by the daily rate of .00025.¹

Say you underpaid your first installment by $2,000 and didn’t catch up until May 1 of the following year. That’s 365 days. The addition to tax for that installment comes to $2,000 × .00025 × 365, or $182.50. Assuming payment by May 1, the maximum day counts for the four periods are 365, 320, 228, and 106. Your total addition to tax is the sum across whichever periods had shortfalls.

The rate can change from year to year, so check the current form before relying on the 9% figure for a prior or future year.

Filling Out the Form

Start with your current-year income tax liability from your Virginia return. On Form 760, that’s Line 18, the net amount of tax after credits, not Line 19, which is your withholding.⁶ You’ll also need:

Your prior-year Virginia tax liability if you’re claiming Exception 1 or 2
The date and amount of every estimated payment you made
Virginia withholding reported on your W-2s or 1099s
A month-by-month income breakdown if you’re using Exception 3 or 4

Getting the income timing right under Exceptions 3 and 4 is where filers tend to slip. If your records don’t clearly show when income was received, the state can recalculate and bill you for the difference. Electronic filers can usually enter the data through their tax software; paper filers mail everything to the Virginia Department of Taxation in Richmond.²

Asking for a Waiver

If unusual circumstances kept you from paying on time, Virginia will consider a waiver. For accrued penalties under $2,000, you can request one through Virginia Tax Customer Service. Penalties above $2,000 require a formal Offer in Compromise using Form OIC I-2 for individuals, with supporting documentation and a possible $50 administrative fee, submitted to the Tax Commissioner in Richmond.⁷

A waiver request does not stop interest from accruing while your case is under review. If your underpayment traces back to a federally declared disaster affecting Virginia, check whether the state has extended any filing or payment deadlines, since shifted installment dates can reduce or eliminate the addition to tax.

1
Virginia Department of Taxation. 760C 2025 Underpayment of Virginia Estimated Tax by Individuals, Estates, and Trusts
2
Virginia Department of Taxation. Instructions for Form 760C – Underpayment of Virginia Estimated Tax by Individuals, Estates, and Trusts
3
Virginia Tax. When to File
4
Virginia Code Commission. Virginia Code 58.1-491 – Payments of Estimated Tax
5
Virginia Department of Taxation. 2025 Form 770 Virginia Fiduciary Income Tax Return Instructions
6
Virginia Department of Taxation. Virginia Form 760 – Resident Income Tax Return
7
Virginia Tax. Offer in Compromise