W. Va. Code R. § 110-21-56a

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-21-56a - Additions To Tax For Failure To Pay Estimated Tax

56a.1. Applicability. - The additions to tax provisions of W. Va. Code '11-10-18a are applicable to underpayments of estimated personal income tax. Such provisions will be applicable regardless of whether there is a failure to pay the entire amount of any installment of estimated tax on or before its due date or the amount of estimated tax (employer withholding tax plus installment payments) paid during the taxable year was less than ninety percent (90%) of the tax due for the taxable year. Exceptions to this rule, hereinafter referred to as "safety zones", are set forth in Subsection 56a.4 of this regulation.

56a.2. How Underpayment Of Estimated Tax Is Measured.

56a.2.1. In General. - To determine whether an individual's estimated tax payments for the taxable year equal at least ninety percent (90%) of his or her actual liability for the primary tax, and minimum tax imposed by W. Va. Code '11-21-3, the following procedure shall be applied. The term "estimated tax payments" includes both the amount of installment payments remitted under W. Va. Code '11-21-56, and the amount of taxes actually deducted and withheld at the source from wages under W. Va. Code '11-21-71.

(1) Determine the sum of the individual's primary income tax shown on his or her return for the taxable year (as reduced by the amount of allowable credits) plus his or her minimum tax for the taxable year. If no annual return was filed, take one hundred percent (100%) of the total tax determined to be due for the taxable year.

(2) Take ninety percent (90%) of the above amount.

(3) Divide the amount of (2), above, by the number of installments required for the year. Generally, this will require dividing by four, but may be three, two or one. See Subsection 56.1 of these regulations.

(4) For each installment as computed in (3), above, find the excess, if any, over the amount actually paid or credited toward that installment payment. (Add in any overpayments available from a previous installment). If there is not excess, no further computation is necessary for that installment. For purposes of subparagraph (4), it is presumed that wages are received in equal payments throughout the year and that taxes are withheld under W. Va. Code '11-21-71 in equal installments.

56a.2.2. Amount Of Underpayment. - Any excess computed in (4), above, for any installment is the amount of underpayment of that installment. If the actual payment made which is an underpaid installment does not meet at least one (1) of the available safety zone tests, additions to tax must be paid on the amount of that underpayment of estimated tax as provided under W. Va. Code '11-10-18a. Additions to tax for failure to pay estimated tax are not waiveable by the Tax Commissioner.

56a.3. Period Of Underpayment. - The period of underpayment shall run from the date the installment was required to be paid to whichever of the following is earlier:

(1) The due date of the annual return following the close of the taxable year for which the installment was due;

(2) With respect to any portion of the underpayment, the date on which such portion is paid. For purposes of this regulation, a payment of estimated tax on any installment shall be considered a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment which would be required to be paid if the estimated tax were an amount equal to ninety percent (90%) of the tax shown on the return for the taxable year for such installment date.

56a.4. "Safety Zones" Bar Imposition Of Additions To Tax For Under Payment Of Estimated Tax.

56a.4.1. In General. - Additions to tax will not be imposed for any underpayment of any installment of estimated tax if, on or before the date prescribed for payment of the installment (determined with regard to any authorized extension of time for payment), the total amount of all payments of estimated tax made equals or exceeds the least of the amounts due under "Safety Zones" 56a.4.1.3 through 56a.4.1.5 unless "Safety Zones" 56a.4.1.1 or 56a.4.1.2 is applicable:

56a.4.1.1. Safety Zone No.

1. - The amount of tax due with the annual return on the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year is two hundred dollars ($200) or less.

56a.4.1.2. Safety Zone No.

2. - The amount of tax due with the annual return on the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year is ten percent (10%) or less of the tax liability for the taxable year.

56a.4.1.3. Safety Zone No.

3. - The amount of "tax shown" on the previous year's West Virginia personal income tax return was a taxable year of twelve (12) months reduced by the amount of West Virginia withholding taxes for the current year. Safety Zone No. 3 avoids additions to tax if the total payments of estimated tax made by each installment date are at least equal to the amount which would have been required on that installment date if the estimated tax was the amount of "tax shown" on the previous year's West Virginia Personal Income Tax Return reduced by the amount of West Virginia withholding taxes for the current year. In applying Safety Zone No. 3, the following rules shall apply:

56a.4.1.3.a. An individual that did not file a West Virginia personal income tax return for the preceding year cannot use Safety Zone No. 3.

56a.4.1.3.b. A married couple that did not file a joint West Virginia personal income tax return for the preceding tax year cannot use Safety Zone No. 3.

56a.4.1.3.c. The applicable tax credits are those allowed on the annual return for the preceding tax year.

56a.4.1.3.d. If the annual return for the preceding year is not filed on or before the due date of the declaration of estimated tax for the taxable year, the declaration of estimated tax for the current tax year cannot be based on last year's tax.

56a.4.1.4. Safety Zone No.

4. - The amount of tax which would be due if computed based on the facts and law applicable to the West Virginia Personal Income Tax Return for the preceding year, but using current year rates, personal exemptions and credits. This safety zone avoids additions to tax if the total payments of estimated tax already made by the installment date are at least equal to an amount which would have been required on that installment date if the estimated tax was a tax based on the facts shown on the previous year's return and the previous year's law, but using current year rates, personal exemptions and credits. In applying Safety Zone No. 4, the following rules apply:

56a.4.1.4.a. Nonrecurring items of income and deductions are not to be excluded.

56a.4.1.4.b. An individual who did not file a West Virginia personal income tax return for the preceding tax year cannot use Safety Zone No. 4.

56a.4.1.4.c. A married couple that did not file a joint West Virginia personal income tax return for the preceding tax year cannot use Safety Zone No. 4.

56a.4.1.5. Safety Zone No.

5. - The amount of West Virginia personal income tax which would have been required to be paid on or before the date prescribed for payment if the estimated tax was an amount equal to ninety percent (90%) of the tax for the current taxable year, and computed by placing on an annualized basis the taxable income: for the first (1st) three (3) months of the taxable year where the installment is required to be paid in the third (3rd) or fourth (4th) month; for the first (1st) three (3) months of the first (1st) five (5) months of the taxable year where the installment is required to be paid in the sixth (6th) month: for the first (1st) six (6) months or the first (1st) eight (8) months of the taxable year where the installment is required to be paid in the ninth (9th) month and for the first (1st) nine (9) months or for the first (1st) eleven (11) months of the taxable year where the installment is required to be paid in the twelfth (12th) month of the taxable year or the first (1st) month of the next succeeding taxable year.

56a.4.1.5.a. For purposes of Subsection 56a.4.1.5, the taxable income shall be placed on an annualized basis by multiplying by twelve (12) the taxable income and dividing the resulting amount by the number of months in the taxable year by three (3), five (5), six (6), eight (8), nine (9) or eleven (11) as the case may be.

56a.4.2. Application Of Safety Zones To Short Tax Years. - Additions to tax for an underpayment of estimated tax are equally applicable to short tax years where a declaration of estimated tax is required to be filed. In computing the safety zones for short taxable years, the estimated tax (whether based on that shown on the previous year's return, based on the previous year's facts, or annualized current income) 18 reduced by multiplying the estimated tax for a full year by the percentage which the number of months in the short tax year bears to twelve (12). For this safety zone, the percentage figure will be applied to reduce the tax.

56a.4.2.1. If the preceding taxable year was a short year, estimated tax for the current year (for purposes of Safety Zone No. 4) will be computed on an annual basis (income multiplied by twelve (12) minus number of months in the short year). The tax will not be reduced because of the short year.

56a.4.2.2 If the tax rates for the year of underpayment have changed for the preceding year, the estimated tax must be computed using current rates.

56a.4.3. Safety Zone Requirements. - Safety zone requirements must be satisfied on each installment date to avoid the imposition of additions to tax on an underpayment of estimated tax as of the installment date. For purposes of this regulation, it is presumed that a taxpayer's West Virginia taxable income is received in equal installments throughout the taxable year. The taxpayer bears the burden of proof to establish that the West Virginia taxable income was received during the taxable year in some other manner.

56a.4.4. Return For The Preceding Taxable Year. - The term "return for the preceding taxable year" means the West Virginia Personal Income Tax Return required to be filed under W. Va. Code '11-21-51 for the taxable year immediately preceding the current taxable year. If an amended return was filed for the preceding taxable year before the due date of the declaration of estimated tax for the current taxable year (determined with regard to any extension of time for filing), then it constitutes the return for the preceding taxable year if it is a reasonable estimate of the amount of tax due for the current taxable year.

56a.4.5. "Facts Shown On The Preceding Year's Return." - The facts shown on the preceding year's return may include a net operating loss deduction properly claimed on the preceding year's return, information shown on a West Virginia joint personal income tax return for the preceding taxable year where the individual no longer qualifies to file a joint return, and tax credits claimed on the return for the previous year, even though allowable credits for the current taxable year are reasonably expected to be greater than or less than those allowed for the preceding year.

W. Va. Code R. § 110-21-56a