Key takeaways
- An S corporation files Form 502 with Virginia, or Form 502PTET if it elects the entity-level tax.
- For a calendar-year 2026 return, Form 502 is due April 15, 2027, with an automatic six-month extension to October 15, 2027.
- The extension does not extend payment: nonresident withholding is due on the original date.
- Nonresident withholding is 5% of each nonresident owner's Virginia-source share, unless an exception applies.
- Collect owner residency, ownership percentages and Virginia apportionment support before preparing anything.
What the entity files
A Virginia S corporation files an annual return on Form 502. If it elects the pass-through entity tax, it files Form 502PTET instead. The Department of Taxation says the PTET return must be filed electronically and reports only the income attributable to eligible owners.
Virginia follows the federal pass-through model, so the corporation itself does not pay a corporate income tax on ordinary S corporation income. The state-level tax events are the owner-level tax on the shareholders' Virginia returns, the withholding the entity pays for nonresident owners, and the PTET if the client elects it.
Due date and extension for tax year 2026
The statute sets the due date at the fifteenth day of the fourth month after the close of the taxable year. For a calendar-year 2026 return that is April 15, 2027. This is a month later than the federal S corporation deadline, so build a separate state date into the calendar instead of reusing the federal one.
Virginia allows an automatic six-month extension with no application, which carries a calendar-year entity to October 15, 2027. For the prior year the dates are April 15, 2026 and October 15, 2026, so any 2025 Form 502 still open is already past the extended date.
If the due date lands on a weekend or holiday, the next business day applies. April 15, 2027 is a Thursday, so no shift is needed.
Money is not extended
The extension covers filing, not payment. Withholding paid with Form 502W is due on the original return date even if the return is on extension. The rule requires the entity to pay at least 90% of the current-year withholding by then, or 100% of the prior year's tax if the prior year was a full twelve months with withholding paid. The balance goes in with the return.
The penalties stack in a way clients do not expect. If less than 90% of the withholding is paid by the original date, the extension penalty runs at 2% per month or part of a month, capped at 12%. Late payment runs at 6% per month, capped at 30%, and when both apply in the same month the greater applies. A return filed after the extended date carries a maximum late filing penalty of $1,200.
Worked example: a nonresident owner has an $80,000 Virginia-source share. Withholding is $4,000, and the entity must have paid at least $3,600 by April 15, 2027 to avoid the extension penalty, even though the return may not be filed until October 15, 2027.
Nonresident owner withholding at 5%
If the entity has income from Virginia sources and any of it belongs to a nonresident owner, it must withhold 5% of that owner's share of Virginia-source income. Allowable credits can reduce the amount, but not below zero for any owner.
The statute lists four exceptions: nonowners that are exempt from federal income tax on that income, nonresident corporations that are exempt, an undue hardship the Tax Commissioner approves in writing, and nonresident owners of an entity that owns and leases four or fewer dwelling units in Virginia. The entity may rely on an owner's written statement for the exempt cases if it reports the owner's name and federal taxpayer identification number.
Decision rule: if every shareholder has a Virginia address on the stock ledger and no owner is a trust, estate or another entity with a nonresident member, withholding is likely zero. Confirm each owner's residency in writing instead of inferring it from the mailing address on last year's return, because a shareholder who moved mid-year changes the answer.
Composite return on Form 765
An entity doing business in Virginia with at least two qualified nonresident owners can file a composite return on Form 765. A qualified owner is a natural person who owns directly, is a Virginia nonresident and has Virginia-source income from the entity. The entity may include some owners and pay withholding for the rest.
Requirements: a Schedule VK-1 to each included owner, a signed consent form from each, and estimated payments under the entity's FEIN on Form 760ES. A nonresident with other Virginia-source income, such as a second Virginia business or rental, cannot lean on the composite alone and must file Form 763. Form 765 does not replace the entity's Form 502.
Pitch it to nonresident shareholders who would otherwise file a Virginia return for a small amount. Do not offer it to someone with other Virginia income.
The PTET election
Under Virginia Code 58.1-390.3 the entity can elect to pay tax at 5.75% on Virginia taxable income attributable to eligible owners, which are Virginia-taxable natural persons, estates or trusts. The election is made annually on the timely filed return, on or before the due date including extensions. The entity removes its federal deduction for state and local income taxes, and each owner takes a credit for the pro rata share of tax paid, with any excess refundable.
The Department requires estimated payments, typically quarterly, starting with tax year 2023, paid through the PTET-PMT eForm or ACH credit. The deadlines and extension rules match Form 502, and the extension does not extend payment.
Check the 2026 Form 502PTET instructions before quoting the election to a client. No 2026 package was published when this guide was reviewed, and the statute text has no stated end date, but confirm that on the Department's pass-through entities page before you rely on it.
What to collect from the client
Send the request in November, while shareholders can still be found: "For each shareholder, please send the legal name, tax ID, percentage owned on each day of 2026, and the state they lived in on December 31, 2026. If anyone moved during the year, give the move date." Keep the answers in a signed or portal-submitted record.
Ask for support for Virginia-source income if the business works in several states: payroll by state, sales by destination and any property outside Virginia. Without it you will default to all income being Virginia-source and over-withhold.
Ask for the prior-year Form 502, Form 502W payments and any estimated PTET payments with dates and amounts. For composite filers, collect signed consent forms. Give the client a late date, a few weeks before April 15, 2027, so the withholding amount is known before the payment date.
Where Usual fits
A shareholder residency and ownership request is a recurring, structured question with a deadline, so a document collection tool that tracks who has answered and sends reminders saves a chase. Usual does that, and an upload field can take the signed composite consent forms.
The tracking helps only if the request names the exact items above. A vague request for state information gets a vague reply.