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Virginia

Virginia payroll taxes: Your 2025 guide to staying compliant

By QuickBooks
Published on December 24, 2025

Virginia is a historically rich and economically diverse state, offering a favorable climate for both small businesses and large enterprises. As of 2024, Virginia's real gross domestic product (GDP) stood at approximately $764.4 billion, with key industries including government contracting, technology, and agriculture. The state also boasts a growing presence in sectors like cybersecurity, logistics, and advanced manufacturing. Its strategic location near Washington, D.C., coupled with a highly educated workforce, makes Virginia an attractive destination for businesses of all sizes. However, navigating the state’s payroll tax landscape requires diligence and a solid understanding of employer responsibilities.

This guide explains Virginia’s payroll taxes, the risks of non-compliance, and how to ensure your business stays on the right track.

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What are payroll taxes?

Payroll taxes are taxes based on wages, salaries, or other compensation that both employers and employees must pay. While income taxes are also withheld through payroll, payroll taxes specifically fund programs like Social Security, Medicare, and unemployment insurance.

Understanding Virginia payroll taxes

When starting a new business in Virginia, you need to understand and comply with both federal and state payroll taxes.

Federal payroll taxes

Payroll taxes are mandatory and encompass both federal and state requirements. 

Federal payroll taxes include:

  • Federal income tax: This is withheld from each employee's paycheck based on their W-4 form and the current IRS tax brackets. You'll be responsible for calculating the correct amount, withholding it, and then sending it to the IRS.
  • Social Security and Medicare taxes: Both of these taxes have a portion paid by the employee and a matching portion paid by you, the employer. For Social Security, the combined rate is 12.4% on the first $176,100 of wages in 2025. For Medicare, it's 2.9% on all wages, with an extra 0.9% for higher earners. You'll withhold the employee's portion and match it.
  • Federal Unemployment Tax (FUTA): This is paid solely by you at a rate of 6% on the first $7,000 of each employee's wages. However, most employers get a 5.4% credit, reducing the rate to 0.6%. The graphic below lists some best practices for managing your FUTA obligations.
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Virginia state payroll taxes

In addition to federal payroll taxes, Virginia employers must also comply with several state-specific payroll tax requirements.

  • State income tax withholding – Virginia Withholding Tax: Employers must withhold Virginia state income tax from employee wages based on the Virginia Employee’s Withholding Allowance Certificate (Form VA-4) and the state’s withholding tables. In 2025, the rates range from 2% to 5.75%. Withheld amounts must be remitted to the Virginia Department of Taxation on a set schedule (monthly or quarterly) depending on total liability.
  • Unemployment Insurance tax (UI): Employers in Virginia are required to pay Unemployment Insurance tax to support workers who have lost their jobs through no fault of their own. The standard tax rate for new employers in 2025 is 2.5%, applied to the first $8,000 of each employee’s wages. After an employer has established an experience rating, the rate can vary between 0.1% and 6.2%.

Virginia local payroll taxes

While Virginia does not have any local payroll taxes like some other states, certain jurisdictions may require business licenses or impose business, professional, and occupational license (BPOL) taxes. These are not traditional payroll taxes, but they can still affect your overall employment costs. To ensure you understand what you may be liable for: 

  1. Check with your local government to find out if your business is subject to any local payroll-related taxes or licensing requirements. City or county offices in Virginia can provide the most current information regarding local obligations, including any business license (BPOL) taxes or employment-related fees that may apply.
  2. Consult a tax professional if you need clarification on local payroll compliance. An accountant specializing in Virginia payroll taxes can help determine whether any local requirements impact your business and ensure you stay compliant with all applicable state and local regulations. 

Other important tax considerations

Multiple locations

If your business has employees working in multiple cities or counties, you may be subject to different local taxes for each location.

Changing rates

Local tax rates can change over time, so it's important to stay informed about any updates that may affect your business.

Employer responsibilities for payroll taxes in Virginia

As a Virginia employer, you're responsible for managing a complex array of federal and state payroll taxes, which involves careful calculation, timely withholding, and accurate reporting to various government agencies. Here’s an overview of what you should know.

Registering for payroll taxes

To comply with Virginia’s state regulations, employers must register for payroll taxes before paying employees or conducting business operations that involve hiring staff. Registering ensures your business can properly handle state income tax withholding, unemployment insurance contributions, and new hire reporting. Below are the key steps to register for payroll taxes in Virginia:

  • Reserve Your Business Name Start by verifying your desired business’s name availability through the Virginia State Corporation Commission (SCC) website. If the name is available, you can reserve it for a small fee, helping secure your business identity while completing other setup requirements.
  • Choose Your Business Structure and Register Your Business: Decide on the legal structure of your business (LLC, corporation, partnership, etc.). Then, register your business entity with the Virginia State Corporation Commission via the SCC Clerk’s Information System (CIS). Registration fees vary based on your chosen structure.
  • Obtain an Employer Identification Number (EIN): Before proceeding with state-level registrations, apply for a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is required for federal tax filings and is necessary to register for state payroll tax accounts. You can obtain an EIN online at no cost via the IRS website.
  • Register with the Virginia Department of Taxation: After receiving your EIN, register with the Virginia Department of Taxation to set up your state withholding tax account. This account allows you to withhold Virginia state income tax from employees' wages and remit it to the state. Registration can be completed online through the Virginia Tax Business iFile system.
  • Register with the Virginia Employment Commission (VEC): Employers must also register with the Virginia Employment Commission to manage unemployment insurance (UI) contributions. You can create a VEC account online through the VEC’s Employer Self-Service portal. Once registered, you’ll be responsible for submitting quarterly wage reports and paying UI taxes based on your assigned rate.
  • Report New Hires to the Virginia New Hire Reporting Center: Virginia law mandates that all employers report newly hired and rehired employees within 20 days of their hire date. These reports support the enforcement of child support laws and help detect unemployment insurance fraud. You can file new hire reports online, by mail, or by fax through the Virginia New Hire Reporting Center.

Calculating payroll taxes

Accurately calculating payroll taxes is crucial for staying compliant and avoiding costly penalties. Employers in Virginia have several reliable options to ensure proper calculations:

  • Check government websites: The Virginia Department of Taxation offers withholding tax tables, forms, and guidance to assist employers in determining the correct amount of state income tax to withhold from employee wages. This information is available on the department’s official website and is updated regularly. 
  • Payroll software: Some small business software payroll programs have built-in Virginia tax tables that automate calculations, saving you time and minimizing the chance for errors.
  • Professional services: If you prefer to outsource payroll, a professional payroll service can handle everything for you.

Whichever method you choose, make sure you stay updated on the current tax rates and wage limits, as these can change every year. 

Withholding state payroll taxes

Once you’ve calculated the appropriate payroll tax amounts, you must withhold these funds from employee wages and submit them to the correct agencies on schedule. Following Virginia’s withholding and payment deadlines is essential to avoid fines and ensure compliance with state regulations.

State Income Tax Withholding (SIT): Employers in Virginia are required to withhold state income tax from employee wages using the information provided on Form VA-4, Employee’s Virginia Withholding Exemption Certificate. Withholding should be calculated using the Virginia Department of Taxation’s Employer Withholding Instructions and tax tables.

  • Example: If an employee earns $4,000 monthly and claims no exemptions, the estimated SIT withholding could be approximately $208 each month, based on Virginia’s withholding tables.

Unemployment Insurance (UI): Virginia employers must also contribute to the state’s Unemployment Insurance program, which provides temporary financial assistance to workers who lose their jobs through no fault of their own. The UI tax rate is assigned annually and depends on the employer’s experience rating. New employers typically receive a standard entry rate.

  • Example: If the standard new employer rate is 2.5%, and an employee earns $6,000 in a quarter, the employer would pay $150 in UI taxes for that quarter (2.5% of $6,000), subject to the state’s taxable wage base.

By applying these calculations to each paycheck, you ensure accurate withholdings and compliance with state requirements.

Remitting state payroll taxes

In Virginia, if your business withholds taxes from employee wages, you are required to remit these amounts to the Virginia Department of Taxation and the Virginia Employment Commission (VEC) according to the prescribed schedules.

Filing payroll tax returns in Virginia

Employers in Virginia must adhere to both quarterly and annual payroll tax filing requirements to remain compliant with state and federal laws. Timely submission of these returns ensures proper reporting of withheld income taxes and unemployment insurance contributions.

Quarterly requirements

Annual requirements


Penalties for late filing or non-compliance and tips for staying organized

There is a 6% monthly penalty (up to 30% total) for late payroll tax payments in Virginia. Additional fees may apply for late filings, including federal penalties for failing to file or pay on time. To help you stay organized and avoid these costly penalties, consider the following tips:

  • Set reminders: Mark all payroll tax deadlines on your calendar, set alerts on your phone or computer, and use task management or payroll software tools to keep track of important due dates.
  • Use Virginia’s online services: Take advantage of Virginia Tax’s online portal for electronic filing and payments. This convenient platform helps reduce errors and delays often associated with paper filings.
  • Consider payroll software: Invest in reliable payroll software that automatically calculates taxes and sends reminders about upcoming deadlines. This minimizes the risk of calculation mistakes and missed payments.
  • Outsource payroll: If managing payroll feels overwhelming, consider partnering with a reputable payroll service provider. They will manage tax calculations, filings, and payments for you, ensuring your business stays compliant.
  • Seek professional help: If you have any questions or concerns about payroll taxes, don't hesitate to consult with a tax professional or accountant. They can provide expert guidance and help you tackle the complexities of payroll tax compliance.
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Payroll tax credits and incentives

Virginia offers a variety of tax credits, deductions, and incentive programs designed to encourage business growth, job creation, and investment in key industries. These incentives can help reduce your overall tax burden while supporting the state’s economic development goals. Here are some notable credits and incentives available to Virginia employers:

Federal Research and Development (R&D) Payroll Tax Credit

Eligible businesses can apply a portion of the federal R&D tax credit toward their employer share of Social Security payroll taxes. This credit encourages innovation and the development of new products or processes, benefiting startups and established companies alike.

Federal Unemployment Tax Act (FUTA) Credit

Employers who pay their Virginia state unemployment insurance (SUI) taxes on time and in full may qualify for a FUTA credit of up to 5.4%, reducing the federal FUTA tax rate from 6.0% to 0.6% on the first $7,000 of wages per employee.

Work Opportunity Tax Credit (WOTC)

The WOTC allows Virginia employers to reduce their federal tax liability by up to $9,600 for each new hire from certain targeted groups, such as veterans, ex-felons, and individuals receiving public assistance. This credit incentivizes the hiring of individuals facing barriers to employment.

Virginia Enterprise Zone Grant Program

Businesses operating within designated enterprise zones may qualify for state and local tax credits through the Virginia Enterprise Zone Grant Program based on job creation, investment, and rehabilitation of property. This program supports economic growth in targeted areas through various tax incentives.

Coalfield Employment Enhancement Tax Credit

Designed for businesses investing and creating jobs in Southwest Virginia’s coalfield region, the Virginia Coalfield Employment Enhancement Tax Credit provides incentives for companies to contribute to economic diversification and workforce development.

Renewable Energy Tax Incentives

Virginia offers tax credits and grants for businesses investing in renewable energy projects, such as solar, wind, and biomass. These incentives promote sustainability and energy efficiency in commercial operations.

Motion Picture Production Incentive

Virginia’s film and television production incentive offers grants based on qualified production expenses, including payroll costs. This program attracts productions to the state, boosting local economies and supporting creative industries.

Industries frequently benefiting from Virginia business tax credits

  • Technology and R&D companies. Businesses focused on research, innovation, and software development may qualify for the Virginia Research and Development Expenses Tax Credit, which encourages investment in qualified R&D activities within the state. Some startups may also be eligible to apply the Federal R&D Payroll Tax Credit toward their Social Security tax liability, supporting early-stage growth and innovation.
  • Manufacturing and industrial firms. Manufacturers can take advantage of the Major Business Facility Job Tax Credit, which provides tax relief for companies that create at least 50 new full-time jobs in Virginia. Additionally, manufacturers that invest in economically distressed localities may qualify for the Virginia Investment Partnership Grant or the Economic Development Access Program, which helps improve infrastructure linked to job-creating projects.
  • Green and renewable energy businesses. Virginia offers various programs for businesses investing in clean energy technologies. The Clean Energy Equipment Tax Exemption allows certain solar, wind, and geothermal equipment to be exempt from state and local taxation. These businesses may also benefit from federal credits such as the Renewable Electricity Production Tax Credit (PTC) or Investment Tax Credit (ITC).
  • Film and television producers. The Virginia Motion Picture Production Tax Credit provides refundable credits based on qualifying in-state production expenses, including wages (and other payroll costs) and purchases. Productions that highlight Virginia locations and hire Virginia residents may receive enhanced credit rates, making the state a competitive destination for filmmakers.
  • Affordable housing developers. Developers building low-income housing may qualify for the Virginia Low-Income Housing Tax Credit, which mirrors the federal version and provides dollar-for-dollar reductions in tax liability for qualifying projects. This credit supports efforts to increase access to affordable housing across the state.
  • Agribusiness and forestry operations. Farms, vineyards, and forestry operations may benefit from the Agricultural Best Management Practices Tax Credit, which rewards environmentally responsible land use. Additionally, operations investing in value-added production or job creation may qualify for the Governor’s Agriculture and Forestry Industries Development (AFID) Fund.

Consult with a tax professional to understand what tax credits and incentives you could potentially apply to your business.

Common payroll tax mistakes in Virginia (and how to avoid them)

Navigating Virginia’s payroll tax obligations can be complex, especially for growing businesses. Below are some of the most common employer mistakes—and how to avoid them to stay in full compliance.

Misclassifying workers

Incorrectly labeling employees as independent contractors can lead to audits and fines. Virginia uses criteria similar to the IRS for classification, but you should always verify worker status under both state and federal rules. When roles are ambiguous, it’s best to consult a tax advisor or legal professional to avoid future complications.

Missing deadlines

Virginia requires timely filings for both withholding and unemployment taxes. Missing monthly or quarterly deadlines can result in late fees, penalties, and interest. Set up reminders through payroll software or online calendars to stay on schedule.

Incorrect withholding calculations

Virginia withholding calculations follow state-specific rules that differ from federal standards. Always use the latest Virginia Withholding Tax Tables and ensure your payroll software is up to date. Recalculating withholding after life events like raises or marital status changes is also critical.

Failing to register for unemployment insurance (UI)

Some businesses mistakenly overlook registering with the Virginia Employment Commission (VEC) for unemployment insurance. If you pay wages over $1,500 in a quarter or have an employee working 20 weeks or more in a calendar year, you’re likely required to register. Register early to avoid noncompliance penalties.

Overlooking local tax obligations

While Virginia does not impose city-level payroll taxes like some other states, certain localities may have business license taxes or specific filing requirements. Confirm with your local Commissioner of the Revenue office to ensure you’re not missing anything.

Not updating employee forms

Failure to maintain current employee documentation—like Form VA-4 (Virginia Employee’s Withholding Allowance Certificate)—can result in incorrect tax withholding. Ask employees to review and update their forms annually or when personal situations change, such as getting married or having children.

Misapplying unemployment insurance (UI) rates

Many employers use outdated UI rates or apply the wrong rate category. Each year, the VEC sends employers updated tax rate notices, which must be used for accurate contribution calculations. Review your notice annually and input the correct rate into your payroll system.

Inadequate recordkeeping

Virginia recommends retaining payroll tax records for a minimum of four years, including wage information, tax payments, and correspondence with the VEC and the Virginia Department of Taxation. Use secure digital payroll tools or cloud storage to organize and back up all documentation properly.

Tip: QuickBooks Payroll can help you avoid these common mistakes by automating calculations, tracking deadlines, and keeping accurate records.

How to manage your small business payroll obligations 

Understanding the nuances of Virginia's payroll taxes and regulations can take some time. Follow our small business tax preparation checklist and these steps to help you manage your payroll taxes.

Step 1. Partner with a tax professional

Consult a tax professional familiar with Virginia’s payroll taxes and regulations. They can guide you through compliance requirements, local tax nuances, and potential tax benefits for your business.

Step 2. Explore payroll software

Consider using payroll software to streamline your payroll processes. Tools like QuickBooks automate tax calculations, minimize errors, and ensure compliance with Virginia laws.

Step 3. Proactively plan for compliance

Stay informed about Virginia’s payroll tax deadlines and updates. Payroll software combined with expert guidance can help ensure you meet state and local requirements.

Step 4. Optimize your tax strategy

Work with your tax professional to uncover deductions, credits, or other incentives that could benefit your business. Leverage software reports to better understand your payroll data and identify opportunities for savings.

Step 5. Build a financially strong foundation

By combining expert guidance with the right tools, you can efficiently manage payroll taxes and focus on growing your business in the [State region or nickname].

What are the payroll taxes in Virginia?

Virginia’s payroll tax system includes state income tax withholding and employer contributions to unemployment insurance. While Virginia does not have a state disability insurance tax or local payroll taxes, employers must comply with both state and federal payroll tax obligations.

Calculating payroll taxes in Virginia

Payroll tax calculations in Virginia depend on several factors, including:

  • Employee's wages and taxable income
  • Employer's UI tax rate
  • Federal and state taxes

For employees, the main payroll taxes are: 

  • State income tax withholding
  • Federal income tax
  • FICA (Social Security and Medicare taxes)

For employers, the main payroll taxes are:

  • Unemployment insurance (UI) tax
  • Employer portion of FICA taxes
  • Federal Unemployment Tax (FUTA)

To accurately calculate Virginia payroll taxes, you can use the Virginia Department of Taxation’s online withholding tax tables and calculators, payroll software configured with Virginia-specific data, or consult a qualified tax professional. These resources ensure that your business calculates the correct tax amounts and stays compliant with all state requirements.

It’s essential to stay updated on the current rates and regulations, as they can change annually.

Leverage payroll software for compliance in Virginia

Managing payroll in Virginia requires accuracy due to complex regulations. Errors can lead to penalties and legal risks, but QuickBooks streamlines payroll management to ensure compliance. It automatically calculates, files, and pays federal and state payroll taxes—with a 100% accuracy guarantee.** You'll stay current with Virginia tax law changes, easily generate reports for filings, and get up to $25,000 in penalty coverage if issues arise.**


Disclaimer: 

**Accuracy Guaranteed: Available with QuickBooks Online Payroll Core, Premium, and Elite. We assume responsibility for federal and state payroll filings and payments directly from your account(s) based on the data you supply. As long as the information you provide us is correct and on time, and you have sufficient funds in your account, we’ll file your tax forms and payments accurately and on time or we’ll pay the resulting payroll tax penalties. Guarantee terms and conditions are subject to change at any time without notice.

Tax penalty protection: If you receive a tax notice and send it to us within 15 days of the tax notice we will cover the payroll tax penalty, up to $25,000. Additional conditions and restrictions apply. Only QuickBooks Online Payroll Elite users are eligible to receive tax penalty protection.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.


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