Virginia Tax Preparer Requirements 2025-2026

Virginia is one of the most straightforward states in which to launch a tax preparation practice. There is no state license, no bond requirement, no state exam, and no state-mandated continuing education for non-credentialed paid preparers. The only Virginia-specific statutory requirement is a federal PTIN on every Virginia return, per Va. Code Ann. 58.1-348.3. What Virginia does offer is a complex and highly varied client base: approximately 140,000 federal employees concentrated in Northern Virginia, the largest naval installation in the world at Norfolk, a permanent military retirement subtraction that becomes fully unlimited in TY2026, a static OBBBA conformity position that creates a genuine compliance trap on tips and overtime for TY2025, and a permanent Pass-Through Entity Tax that functions as a SALT workaround for business-owner clients. This guide covers everything a Virginia paid preparer needs to know for TY2025 returns and looks ahead to the changes taking effect in TY2026.

Does Virginia Require a State Tax Preparer License?

No. Virginia does not require non-credentialed paid tax preparers to obtain a state license, pass a state exam, post a surety bond, register with a state agency, or complete state-mandated continuing education. The Virginia Board of Accountancy (VBOA) has no authority over non-credentialed preparers or bookkeepers. Any individual who obtains a federal PTIN may legally prepare Virginia individual income tax returns for compensation.

This places Virginia alongside the majority of states that have not enacted preparer-specific registration laws. States with active registration requirements (California, Oregon, Maryland, New York) are the exception. Virginia preparers deal with one Virginia-specific rule: the PTIN placement mandate under Va. Code Ann. 58.1-348.3.

The Virginia PTIN Requirement (Va. Code Ann. 58.1-348.3)

Effective for tax years beginning January 1, 2019, every paid income tax return preparer must include their federal PTIN on all Virginia returns they prepare or assist in preparing. This applies to both individual and business returns.

Penalty for non-compliance (Va. Code Ann. 58.1-348.4): $50 per return, capped at $25,000 per calendar year. The penalty is waived if the failure is determined to be reasonable and unintentional by the Virginia Department of Taxation (TAX). Failing to include the PTIN does not cause the return to be rejected; the return is still processed, but the preparer remains liable for the civil penalty.

Va. Code Ann. 58.1-348.2 separately authorizes TAX to seek a court injunction against preparers engaged in fraudulent conduct or repeated violations. This is the most serious enforcement tool available to the state.

Credential Boundaries: What Non-Credentialed Preparers Cannot Do

Non-credentialed preparers may NOT use the title CPA, nor may they perform audits, reviews, or compilations. Those services require a license from the VBOA. Non-credentialed preparers also have limited IRS representation rights: under Circular 230, they may represent clients during examination of a return they signed before IRS revenue agents and customer service representatives, but they cannot appear before IRS Appeals, Collections, or Tax Court. Completing the Annual Filing Season Program (AFSP, described below) extends these representation rights.

PTIN: The Federal Requirement Every Preparer Carries

2026 PTIN renewal fee: $18.75 (non-refundable; this is the IRS fee for the 2026 filing season). Renew annually by December 31 at irs.gov/ptin. The online process takes approximately 15 minutes. Paper renewal via Form W-12 takes approximately six weeks. A suitability check (criminal background, tax compliance review) is performed on initial applications.

Virginia TAX uses the PTIN to monitor returns for error rates, fraud patterns, and unsubstantiated positions. Both the federal return and the Virginia return must carry the PTIN.

EFIN: Required for Electronic Return Originators

An EFIN (Electronic Filing Identification Number) is required to transmit e-filed returns to the IRS as an Electronic Return Originator (ERO). Apply through the IRS e-Services portal; new applicants without certain professional credentials must complete a fingerprint background check. Virginia does not issue a separate state EFIN. Acceptance into the IRS federal e-file program automatically covers the Virginia Fed/State e-file program.

The PTIN and EFIN are separate. A preparer who e-files for clients needs both.

Annual Filing Season Program (AFSP): Voluntary but Valuable

The AFSP is a voluntary IRS program that grants non-credentialed preparers limited representation rights (beyond the basic examination-of-your-return standard) and listing in the IRS public "Find a Tax Pro" directory. Virginia has no state equivalent.

• Non-exempt preparers: 18 CE hours per calendar year, including a 6-hour Annual Federal Tax Refresher (AFTR) course with a knowledge-based test (70% passing threshold), plus Circular 230 ethics consent.
• Exempt preparers (those who passed an AFTR-equivalent state or national exam): 15 CE hours (10 federal tax law, 3 updates, 2 ethics).
• Completion deadline: December 31 of each calendar year.

America's Tax Professionals is an IRS-approved CE provider (provider number P619F) offering AFSP-qualifying courses. Appearing in the IRS directory gives non-credentialed Virginia preparers a marketing advantage over peers who do not hold the AFSP Record of Completion.

FTC Safeguards Rule: Written Information Security Plan (WISP)

Every paid tax preparer, including solo practitioners, must maintain a Written Information Security Plan (WISP) under the Gramm-Leach-Bliley Act (15 U.S.C. 6801(b)). Required elements include a designated responsible individual, multi-factor authentication (MFA) on all systems containing customer information, a documented risk assessment, and an incident response plan. FTC penalties reach up to $46,517 per violation per day. A free WISP template is available at IRS Publication 5708.

Virginia Individual Income Tax for TY2025

Income Tax Rates and Brackets

Virginia uses four brackets. The top rate of 5.75% begins at $17,001 of Virginia taxable income, a threshold so low that nearly every full-time employee in the state pays the top marginal rate on the bulk of their wages. Virginia has not indexed its brackets for inflation; they have been static since 1990.

In practical terms: a Virginia worker earning $40,000 in taxable income pays the 5.75% rate on all but the first $17,000. That near-universal top-bracket reality is a consistent planning talking point for preparers working with Virginia clients who want to reduce taxable income through retirement contributions, business deductions, or PTET elections.

Standard Deduction (TY2025)

Virginia permanently extended its enhanced standard deduction via the biennial budget bill:

• Single / Married Filing Separately: $8,750
• Married Filing Jointly / Qualifying Surviving Spouse: $17,500

Critical planning point: Virginia's standard deduction is far below the federal standard deduction ($15,000 single / $30,000 MFJ for TY2025 under OBBBA). Many clients who take the federal standard deduction will find it worthwhile to itemize on the Virginia return. Preparers should run a Virginia itemization analysis for every client with mortgage interest, significant charitable contributions, or state and local taxes above $8,750 (single) or $17,500 (MFJ).

Personal and Dependent Exemptions

Virginia uses a two-tier exemption structure:

• Base personal exemption: $930 per filer (one per taxpayer; one per spouse on a joint return)
• Additional exemptions: $800 each for age 65 or older (as of January 1 of the tax year) and for blindness per the federal definition
• Dependent exemptions: $930 per dependent claimed on the federal return

Example: A married couple, both over 65, with two dependents, claims total exemptions of $5,060 [($930 x 2 filers) + ($800 x 2 age) + ($930 x 2 dependents)].

Filing Deadline: May 1 (Not April 15)

Virginia's individual income tax filing deadline is May 1, 2026 for TY2025 returns. This is not a typo. Virginia uses May 1, not the federal April 15 deadline. This distinction matters for scheduling and client communications.

• Automatic extension to file: November 1, 2026 (6-month extension; no form required)
• Payment deadline: May 1, 2026 (the extension is to file only; at least 90% of final tax liability must be paid by May 1)
• Extension penalty: 2% per month on any unpaid balance, up to 12% maximum; interest also accrues on the underpayment

Virginia resident return: Form 760. Nonresident return: Form 763. Part-year resident return: Form 760PY.

Virginia E-File Mandate

Virginia Code requires paid preparers who file 50 or more individual income tax returns in any calendar year to e-file all individual returns from that year forward. Once the 50-return threshold is crossed in any year, the requirement is perpetual; there is no reset.

Fiduciary income tax returns (Form 770) carry a blanket e-file mandate regardless of volume. A hardship waiver is available via an Electronic Filing Waiver Request submitted to Virginia TAX with specific stated hardship. Virginia Tax professional hotline: 804-367-9286.

Virginia OBBBA Conformity: What Applies and What Does Not for TY2025

This is the section that will make or break client relationships in the 2026 filing season. Virginia's position on the One Big Beautiful Bill Act (OBBBA, P.L. 119-21, signed July 4, 2025) is nuanced, and the nuances carry real dollar consequences.

Virginia is on static conformity with the IRC as of December 31, 2025, per House Bill 29 (Chapter 7 of the 2026 Acts of the Assembly), signed by Governor Abigail Spanberger and effective February 20, 2026. Prior to HB 29, Virginia had rolling conformity since 2023. HB 29 reversed that position and locked Virginia to the IRC as it stood on December 31, 2025. Because the OBBBA was signed on July 4, 2025, its provisions fall within that static window -- but HB 29 simultaneously enacted specific decoupling provisions for items Virginia chose NOT to adopt.

Provisions Virginia Decouples From (Add-Backs Required)

The following federal deductions and provisions do NOT apply on Virginia returns. When federal AGI includes deductions from these provisions, preparers must add them back to compute Virginia taxable income:

The Tips and Overtime Trap: The Most Common TY2025 Error

This is the single most consequential state-federal difference for the 2026 Virginia filing season.

Under OBBBA, federal law provides two new above-the-line deductions from federal AGI for TY2025-TY2028: no federal income tax on qualified cash tips in tipping industries (IRC 224), and no federal income tax on the premium portion of overtime compensation, up to $12,500 single / $25,000 joint (IRC 225), with phase-downs starting at $150,000 / $300,000 MAGI.

Virginia does NOT provide these deductions for TY2025. Virginia starts from federal AGI, and because no Virginia-specific tips or overtime deduction exists for TY2025, those amounts remain fully taxable by Virginia. Virginia HB 1965 proposed a Virginia tips deduction beginning TY2026; it had not been enacted as of this writing. Preparers must monitor for any legislative action on TY2026 guidance.

The preparer trap: Tax software that automatically carries federal above-the-line deductions into the state return may reduce Virginia taxable income incorrectly. Preparers must manually verify the Virginia taxable income line for every client claiming the federal tips or overtime deduction. A Virginia server or service worker who received $8,000 in cash tips and claimed the federal deduction still owes Virginia income tax on that $8,000 at 5.75%. An unexpected Virginia balance due from this error will damage client relationships and could generate preparer penalty exposure under the Virginia statute.

Proactively communicate this to clients in service industries (food service, hospitality, hair and beauty, parking and valet) and to clients working overtime-eligible hourly positions before they receive a Virginia bill they did not expect.

Where Virginia Conforms to OBBBA

Not all OBBBA changes are decoupled. Virginia conforms to:

• SALT cap increase: Virginia conforms to the OBBBA SALT cap of $40,000 MFJ / $20,000 MFS on Schedule A, with phase-down beginning at $500,000 MAGI for MFJ / $250,000 for single filers. This is a significant shift from the prior $10,000 TCJA cap and benefits Virginia itemizers with high state and local tax bills. Note that Virginia retains its own Pease-style overall limitation on itemized deductions for higher-income taxpayers; the OBBBA-enacted replacement Pease limitation does NOT apply in Virginia.
• Business interest deduction (IRC 163(j)): Virginia adopts OBBBA's adjusted taxable income calculation changes for the business interest limitation, but reduces the additional Virginia deduction for federally disallowed business interest from 50% to 20%, effective for tax years beginning January 1, 2025.
• GILTI (IRC 951A): Virginia updates its reference to track the OBBBA language on "net controlled foreign corporation tested income."

Federal vs. Virginia Standard Deduction Gap

The OBBBA raised the federal standard deduction to $15,000 single / $30,000 MFJ for TY2025. Virginia's standard deduction remains at $8,750 single / $17,500 MFJ. That gap means a single filer who uses the $15,000 federal standard deduction could have more Virginia itemized deductions available than the $8,750 Virginia standard. Run the Virginia itemization comparison for every client with mortgage interest, significant charitable contributions, or state and local taxes.

Virginia Retirement and Senior Tax Benefits

Social Security: Fully Exempt

Virginia fully exempts Social Security benefits and Tier 1 Railroad Retirement benefits from state income tax. There is no age threshold and no income limit. If a client was required to include any Social Security in federal AGI (under the federal 50% or 85% inclusion rules), they subtract the full included amount on the Virginia return. This exemption applies to all Virginia residents regardless of total income.

This makes Virginia a strong retirement destination for Social Security recipients and is a consistent client planning talking point for preparers serving older adults.

Age Deduction for Older Virginians

Separate from the Social Security exemption, Virginia provides an income-based age deduction for filers born on or before January 1, 1961 (age 65 or older for TY2025):

• Born on or before January 1, 1939: Up to $12,000 per qualifying filer with no income phase-down.
• Born between January 2, 1939, and January 1, 1960: Up to $12,000, reduced $1 for every $1 of Adjusted Fixed Age Group Income (AFAGI) above $50,000 single / $75,000 joint.

The age deduction and the Social Security exemption are separate and stack. A retiree can claim both.

Military Retirement: $40,000 Subtraction Now, Unlimited Starting TY2026

This is the most significant planned change in Virginia's tax code for military-adjacent clients:

• TY2025: Subtraction of up to $40,000 of eligible military retirement pay per filer.
• TY2026 and beyond: The cap is removed entirely. All military retirement pay is fully exempt from Virginia income tax with no dollar limit.
• Eligible income includes retirement pay from service in the U.S. Armed Forces (all branches) and Survivor Benefit Plan (SBP) payments to surviving spouses.
• Medal of Honor recipients: military retirement fully exempt with no cap (already the case).

TSP distributions are NOT eligible for the military retirement subtraction. This is a common client misconception, particularly among federal employees and veterans who hold Thrift Savings Plan accounts. TSP is a defined contribution plan; its distributions are fully taxable by Virginia. The military retirement subtraction applies only to defined benefit retirement pay from the military retirement system, not to TSP.

For near-term military retirees and clients approaching retirement planning decisions, the TY2026 shift to full unlimited exemption is a material planning point that preparers should flag proactively.

Virginia Earned Income Tax Credit: 20% of Federal, Now Refundable

Virginia provides a state EITC equal to 20% of the federal Earned Income Tax Credit amount. For TY2025, the Virginia EITC is refundable (a change from the prior nonrefundable structure). All taxpayers who qualify for the federal EITC automatically qualify for the Virginia credit. This is a meaningful benefit for low-to-moderate income Virginia clients, particularly in markets with service industry, agricultural, or hourly wage client bases.

Note: Virginia also offers the Credit for Low Income Individuals (CLI), a non-refundable credit of $300 per exemption for households below federal poverty guidelines. Taxpayers cannot claim both the Virginia EITC and the CLI on the same return; they must choose the greater benefit. For most EITC-eligible clients, the refundable EITC will provide greater value.

Starting a Tax Preparation Business in Virginia

LLC Formation

Virginia LLCs are registered through the State Corporation Commission (SCC):

• Articles of Organization filing fee: $100 (paid to the SCC)
• Annual registration fee: $50 per year, due by the last day of the LLC's anniversary month
• Late payment penalty: $25, assessed immediately on the due date

Virginia does not impose a franchise tax on LLCs or corporations. This is a genuine competitive advantage compared to states like California (which charges an $800 minimum franchise tax on all LLCs regardless of income) or Texas (which imposes a margin tax on most entities). For a Virginia solo practitioner, the total first-year cost of an LLC is $100 formation plus $50 for the first annual fee.

A single-member LLC is treated as a disregarded entity for federal and Virginia purposes; income flows to the owner's Schedule C. A multi-member LLC defaults to partnership taxation. Local business licenses may be required by individual cities or counties; requirements and fees vary by locality.

Sales Tax on Tax Preparation Services: Not Taxable

Tax preparation services are NOT subject to Virginia Retail Sales and Use Tax. Virginia's sales tax applies to retail sales of tangible personal property and a specific list of enumerated services; professional services including accounting, legal, consulting, and tax preparation are not in the enumerated taxable services category under Virginia Code Title 58.1. A Virginia tax preparer who provides only professional services has no Virginia sales tax collection obligation.

Virginia's statewide sales tax rate is 5.3% (4.3% state plus 1.0% local) for most of the state. Northern Virginia (Fairfax, Arlington, Loudoun, Prince William, and adjacent counties) and the Hampton Roads region carry a higher combined rate of 6.0% due to regional transportation taxes. These rates apply to any taxable products a preparer might sell (tangible goods, software media), but not to service fees.

Virginia Pass-Through Entity Tax (PTET): The SALT Workaround for Business Owners

The Virginia PTET is a major planning tool for any client who operates a pass-through business with significant Virginia income. Preparers operating their own multi-member LLC or S corporation should also evaluate it for their own practice.

What it is: An elective entity-level income tax at 5.75% available to partnerships, multi-member LLCs taxed as partnerships, and S corporations. The entity makes the election and pays the PTET. Each owner receives a refundable Virginia income tax credit equal to their share of the PTET paid.

Why it matters: Because the PTET is an entity-level state income tax, it is deductible by the business for federal income tax purposes as an ordinary business expense. This deduction is not subject to the individual SALT cap on Schedule A. For a business owner with significant Virginia pass-through income, the PTET election effectively allows them to deduct Virginia income tax on business income at the entity level, reducing federal taxable income in a way that individual Schedule A SALT deductions cannot.

Now permanent: Virginia HB 29 (2026) removed the prior sunset provision. The PTET is now a permanent feature of Virginia tax law with no expiration date. The provision treating "substantially similar" out-of-state PTE taxes as paid by Virginia individual owners (for credit purposes) is also now permanent.

Who can use it: Partnerships, multi-member LLCs, and S corporations. The election is made annually, and entities must make quarterly estimated payments of the PTET.

Who cannot use it: Sole proprietors and single-member LLCs treated as disregarded entities. The PTET is not available to these structures because there is no separate entity-level tax layer. A sole practitioner operating as a single-member LLC must look to other tax reduction strategies (retirement plan contributions, home office deduction, health insurance deduction) rather than the PTET.

High-Value Client Niches in Virginia

Northern Virginia Federal Workforce

Virginia has the highest concentration of federal civilian employees in the continental United States, with approximately 140,000 federal employees concentrated in the Northern Virginia corridor (Arlington, Fairfax, Loudoun, and Prince William counties). The Pentagon, NSA, CIA, DHS, and hundreds of defense and intelligence contractor firms operate here.

Key facts for NOVA federal workforce clients:

• Federal employee salaries are fully taxable by Virginia. There is no state exemption for federal wages (only military retirement qualifies for a subtraction).
• TSP distributions are fully taxable by Virginia. This is a critical point that clients often misunderstand. TSP is a federal defined contribution plan; it does not qualify for the military retirement subtraction.
• Defense contractors (Booz Allen Hamilton, SAIC, Leidos, CACI, ManTech, Northrop Grumman, General Dynamics IT) generate high W-2 income and often include RSUs, deferred compensation, and employee stock purchase plans. Equity compensation is Virginia-taxable as ordinary income at vesting or exercise, generally following federal treatment.
• Federal employees teleworking from Virginia for an agency headquartered in DC or Maryland owe Virginia income tax on wages earned while working in Virginia. Virginia taxes based on where work is performed, not employer location.
• Federal buyout and separation income (current in 2026): Deferred resignation payments, early retirement incentives, and lump-sum annual leave payouts from recent federal workforce restructuring create unusual income recognition questions. Virginia federal workers displaced by workforce reductions are a current, lead-generation opportunity for well-positioned preparers.

Reciprocity Agreements: Critical for NOVA Commuters

Virginia has reciprocity agreements with five jurisdictions: the District of Columbia, Maryland, Kentucky, Pennsylvania, and West Virginia. Under these agreements, wages earned by a Virginia resident working in a reciprocity state (or wages earned by a resident of a reciprocity state working in Virginia) are taxed only in the employee's state of residence, not the state where work is performed.

Practical application for NOVA: A Virginia resident who commutes to a Maryland or DC office pays Virginia income tax on those wages (not Maryland or DC tax). They should file a non-residency exemption certificate with their employer to stop the employer from withholding the work-state tax. Preparers serving NOVA commuters must verify the reciprocity status and help clients claim refunds if withholding was done incorrectly for the work state.

Reciprocity applies to wages and salaries only, not to self-employment income, rental income, or other types of income.

Military Personnel and Veterans

Virginia is home to some of the most significant military installations in the country:

• Naval Station Norfolk (Hampton Roads): the largest naval installation in the world
• Fort Belvoir (Fairfax County)
• Marine Corps Base Quantico (Prince William County)
• Joint Base Langley-Eustis (Hampton Roads)
• NAS Oceana (Virginia Beach)
• Fort Gregg-Adams (Prince George County, formerly Fort Lee)

Key Virginia military tax rules for preparers:

• Active duty basic pay: Virginia exempts the first $15,000 of military basic pay, with the exemption phased out dollar-for-dollar between $15,000 and $30,000 of total pay and eliminated entirely above $30,000.
• Combat zone and hazardous duty pay: fully exempt from Virginia income tax.
• Military retirement subtraction: Up to $40,000 for TY2025; fully unlimited starting TY2026.
• SBP payments to surviving spouses: eligible for the military retirement subtraction under the same limits.
• TSP is not eligible for the military retirement subtraction. Clients frequently assume it is; this requires clear explanation.
• SCRA (Servicemembers Civil Relief Act): A servicemember stationed in Virginia but domiciled elsewhere does not acquire Virginia domicile through military orders alone. They file in their state of domicile, not Virginia.
• MSRRA (Military Spouses Residency Relief Act): A military spouse living in Virginia can elect to use the servicemember's state of domicile for income tax purposes, rather than Virginia. Filing analysis is required case by case; the spouse must earn income and must make the election properly.

Agriculture and Conservation: Shenandoah Valley and Rural Virginia

Preparers in the Shenandoah Valley, Southwest Virginia, and rural counties will encounter farm income (Schedule F), farm rental income, and agricultural cooperative distributions. Virginia does not offer a broad enhanced agricultural credit at the state level, but one credit is genuinely distinctive:

Conservation Easement Credit (Va. Code 58.1-339.7): Virginia allows a credit of 40% of the fair market value of donated land to a perpetual conservation easement, transferable, with a cap of $50,000 per taxpayer per year. This credit is highly relevant to agricultural landowners in the Shenandoah Valley and rural Virginia who are considering donating development rights on farmland or timberland. The transferability provision means donors who exceed their own Virginia tax liability can sell excess credits to other Virginia taxpayers. Preparers serving rural landowners should be conversant with this credit and its documentation requirements.

Northern Virginia Technology Sector

Amazon Web Services (headquartered in Arlington/Fairfax), Microsoft Azure government division, and large cybersecurity firms including Leidos, SAIC, and Booz Allen generate a client base with high W-2 income, equity compensation, and multiple-state returns. Virginia taxes ISOs, NSOs, RSUs, and ESPPs as ordinary income at exercise or vesting, generally conforming to federal treatment. Workers earning above $17,000 in taxable Virginia income are at the top 5.75% bracket, which gives retirement contribution strategies (401(k), HSA, IRA) clear and immediate value that clients can see in their withholding.

Other Virginia Tax Credits and Features

Historic Rehabilitation Tax Credit

Virginia offers a 25% credit for the certified rehabilitation of certified historic structures. The credit is transferable and is relevant for preparers serving clients in older urban markets including Richmond, Alexandria, and Norfolk, where historic structures eligible for rehabilitation are common.

Child and Dependent Care Deduction

Virginia provides a deduction (not a credit) equal to the amount of child and dependent care expenses used to compute the federal credit under IRC 21. This deduction is available to Virginia residents who claim qualifying child or dependent care expenses on their federal return.

Key Virginia Forms Reference

Frequently Asked Questions