Virginia 1099 Filing Requirements: What You Need to Know

Businesses and individuals who make certain payments to contractors or other non-employee workers may need to file 1099 forms with the state of Virginia. These filings help ensure proper tax reporting and compliance, preventing potential penalties for missing deadlines or failing to report required income.

Understanding Virginia’s filing rules is essential to avoid errors that could lead to fines or delays.

Who Must File

Virginia requires businesses and certain individuals to submit 1099 forms if they have made reportable payments to non-employees. This applies to corporations, partnerships, sole proprietors, and some nonprofit organizations. While federal law exempts corporations from receiving certain 1099s, Virginia does not always follow this exemption, meaning some payments to corporations must still be reported at the state level.

Employers withholding Virginia state income tax from payments must file 1099 forms with the Virginia Department of Taxation. This includes businesses that voluntarily withhold state taxes for independent contractors, even if the IRS does not require them to do so. Out-of-state businesses with a tax presence in Virginia—such as those with employees, property, or significant economic activity in the state—must also comply.

Virginia’s filing rules extend to landlords paying independent contractors for maintenance services, estates and trusts distributing taxable income to beneficiaries, and government entities reporting certain payments.

Amount Thresholds for Different 1099 Types

Virginia generally follows federal 1099 thresholds. Payments of $600 or more to independent contractors, attorneys, or other non-employees require a 1099-NEC. Rent payments of at least $600 to an individual or partnership must be reported on a 1099-MISC. However, Virginia’s rules on reporting payments to corporations differ from federal guidelines.

Interest and dividend payments exceeding $10 must be reported on a 1099-INT or 1099-DIV. Banks, credit unions, and investment firms issuing taxable interest or dividend income to Virginia residents must comply. Gambling winnings of $600 or more require a 1099-G unless subject to federal withholding, in which case reporting is mandatory regardless of the amount.

Retirement distributions exceeding $10 must be reported on a 1099-R. This includes payments from IRAs, 401(k) plans, and other tax-deferred accounts. Unlike other 1099 forms that apply only to non-employees, 1099-R filings can involve former employees receiving distributions from employer-sponsored plans.

Income Sources That Require 1099 Reports

Payments for professional services, consulting, and freelance work commonly require 1099 reporting in Virginia. This includes fees paid to accountants, marketing specialists, graphic designers, and IT contractors. One-time service providers, such as legal consultants or web developers hired for specific projects, must also be reported if payments meet the filing threshold. Misclassifying workers as independent contractors instead of employees can lead to tax penalties and back payments for employment taxes.

Brokerage firms and financial institutions must issue 1099 forms for taxable transactions beyond interest and dividends. Capital gains distributions, stock redemptions, and securities sale proceeds are reported on a 1099-B. If an investor sells shares through a Virginia-based brokerage, the firm must provide a 1099-B detailing the gross proceeds. Real estate transactions also require reporting, with a 1099-S issued for property sales to capture the seller’s gross proceeds.

Debt forgiveness of $600 or more triggers a 1099-C filing. This applies to mortgage short sales, credit card settlements, and other forgiven debts. The IRS generally considers canceled debt taxable income unless an exclusion applies, such as insolvency or bankruptcy. Virginia follows federal rules in this regard, meaning individuals receiving a 1099-C should determine whether they owe state taxes on the forgiven amount.

Methods for Submission

Virginia offers multiple ways to file 1099 forms, including electronic submission, paper filing, and third-party bulk filing.

Electronic Submissions

Businesses filing 50 or more 1099 forms in a calendar year must submit them electronically. Virginia’s Web Upload service accepts properly formatted text files following IRS Publication 1220 specifications. This method reduces processing time and minimizes errors compared to paper filings.

Filers must ensure submissions include all required fields, such as payer and recipient tax identification numbers, payment amounts, and withholding details. Virginia does not require a state-specific 1099 form but mandates that federal 1099s include Virginia state tax withholding information when applicable. Businesses should retain confirmation receipts from the Web Upload system as proof of timely submission.

Paper Filings

Businesses filing fewer than 50 forms may submit paper 1099s. These must be official IRS 1099 forms, legible, and properly formatted. Forms should be mailed to the Virginia Department of Taxation along with Form VA-6, which summarizes total state tax withheld.

Errors such as incorrect taxpayer identification numbers or mismatched withholding amounts can cause delays or penalties. Businesses should use black ink and avoid handwritten entries for machine readability. While Virginia does not require a separate transmittal form beyond the VA-6, filers should verify mailing addresses and deadlines to prevent late submissions. Keeping copies of all filed documents is recommended.

Third-Party Bulk Filings

Larger businesses and payroll service providers often use third-party bulk filing services for 1099 reporting. These services handle data formatting, submission, and confirmation tracking. Many integrate with accounting software, such as QuickBooks or ADP, to extract payment data and generate 1099 forms automatically.

Virginia allows authorized third-party filers to submit 1099s on behalf of multiple clients, provided they follow the state’s electronic filing requirements. Bulk filers must ensure each submission includes correct payer and recipient details, as well as any Virginia state tax withholding information. Some providers offer compliance checks to reduce the risk of rejected filings. Businesses using third-party services should confirm their provider understands Virginia’s specific requirements.

Deadlines and Penalties

Virginia’s 1099 filing deadlines generally align with federal due dates. For most 1099 forms, including 1099-NEC and 1099-MISC, the state filing deadline is January 31 if reporting nonemployee compensation. Other 1099 forms, such as 1099-INT or 1099-DIV, are due by February 28 if filed by paper or March 31 if submitted electronically. Businesses that withhold Virginia state income tax must also file Form VA-6 by January 31.

Late filings incur a $50 penalty per form, up to a maximum of $10,000 per year. Failure to file entirely may result in additional penalties, including interest on unpaid withholding taxes. Incorrect or incomplete filings, such as missing taxpayer identification numbers or incorrect payment amounts, can also lead to fines. If a filer realizes a mistake after submission, amended 1099 forms must be sent to correct the issue.

Recordkeeping Requirements

Businesses must retain copies of all 1099 forms and supporting documentation, such as invoices, payment records, and withholding statements, for at least four years. This aligns with Virginia’s statute of limitations for tax audits.

Beyond storing copies of filed forms, businesses should maintain detailed payment logs tracking reportable transactions, including dates, amounts, and recipient details. Digital accounting software can help automate this process. Keeping records of communications with contractors regarding tax reporting, as well as proof of submission for electronic filings, is also advisable. If a contractor disputes receiving a 1099 or claims incorrect reporting, thorough documentation can help resolve discrepancies.