Rulings of the Tax Commissioner

May 5, 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 “Taxpayers”) for the taxable year ended December 31, 2020.

FACTS

The Taxpayers, a husband and wife, moved to ***** (Country A) from Virginia in March 2020 and then relocated to ***** (State A) in November 2020. The Taxpayers filed a Virginia resident return and claimed a subtraction for income primarily from compensation received while they resided outside Virginia. The Department disallowed the subtraction and issued an assessment. The Taxpayers appealed, contending they only lived in Virginia for part of the year.  

DETERMINATION

Virginia Code § 58.1-303 provides that any individual who becomes a resident of another state during a taxable year shall be taxable as a Virginia resident for only that portion of the taxable year during which that person was a resident of the Commonwealth. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 further explains that the Virginia taxable income of a part-year resident shall be computed by determining income, deductions, subtractions, additions, and modifications attributable to the period of residence in Virginia. As such, any individual who is a part-year resident of Virginia during a taxable year must apportion their income between their period of residence in and outside of Virginia on a schedule of income filed with their return (Form 760PY). Part-year residents who cease residing in Virginia during a taxable year, and meet the filing threshold of Virginia Code § 58.1-321, must file a Virginia part-year return.  

The Taxpayers were residents of Virginia until they left Virginia in March 2020. As such, they were required to files a part-year return for the 2020 taxable year.

Because the Taxpayers’ proper filing status was as part-year Virginia residents, the nonresident return submitted with the appeal will not be processed. Income attributable to their period of residency outside Virginia, however, would not be subject to Virginia income tax provided it was not otherwise Virginia source income.      

Therefore, the Taxpayers should file an amended Virginia part-year return for the 2020 taxable year to report the income, deductions, subtractions, additions, modifications and personal exemptions attributable to the period of residence in Virginia. The return should be filed within 30 days of the date of this letter and mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23216-7203, Attention:  *****.  Once the return is received, it will be processed and the assessment will be adjusted accordingly. If such return is not filed within the allotted time, the assessment will be adjusted based on the information available.

The Code of Virginia sections 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/3963.B