May 11, 2022
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2016.
FACTS
The Taxpayer filed a Virginia individual income tax return for the 2016 taxable year after the due date without remitting a payment of the tax shown as due on the return. As a result, the Department issued an assessment for the tax due, penalties and interest. The Taxpayer subsequently filed an amended return adjusting her income and changing her deductions from standard to itemized, which eliminated the tax due. When the Taxpayer failed to provide proof that the Internal Revenue Service (the “IRS”) accepted her amended federal return, the Department rejected the amended return and the liability remained payable. The Taxpayer appealed, asserting that the Department must process her amended return. The Taxpayer also requested proof of the Department’s calculations underlying the assessments made for the 2013 and 2017 taxable years, but did not request abatement of the assessments.
DETERMINATION
Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia.
Pursuant to Virginia Code § 58.1-219, the Department retains the authority to adjust the FAGI and itemized deductions where there is clear evidence that the amounts reported on the federal or Virginia income tax return are not consistent with the IRC. As a general rule, the Department relies on the accuracy of information and computations reflected on the federal income tax return when reviewing Virginia individual income tax returns. When a taxpayer files Virginia returns reporting conflicting amounts, however, prudence dictates that the Department verify which amounts are correct under the IRC.
When a taxpayer files an amended Virginia return to claim a refund because of a change in federal taxable income, Title 23 of the Virginia Administrative Code (VAC) § 10-20-180 A 2 requires the taxpayer to provide a copy of the Revenue Agent’s report or other appropriate notice that the change has been accepted by the IRS. Such information essentially certifies a taxpayer’s reported amounts to the Department. To date, the Taxpayer has not provided evidence that the IRS accepted her 2016 amended federal return.
Under these circumstances, I find no basis to abate the assessment. The Taxpayer will receive an updated bill which will include accrued interest to date. The Taxpayer should remit payment of the balance due within 30 days to avoid the accrual of additional interest and possible collections actions.
If the IRS accepts or has accepted the Taxpayer’s amendments, she is instructed to provide a copy of the notice to the Department within sixty days of receipt. Upon receipt for such notice, the Department will adjust the Taxpayer’s account consistent with the IRS computations.
In addition, it is my understanding that representatives of the Department have already provided the information requested with this appeal regarding the 2013 and 2017 taxable years. If the Taxpayer has further questions regarding those years she may contact the Department’s customer satisfaction unit at (804) 786-8083.
The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3970.X