Tax Type
Individual Income Tax
Description
Is Revenue/Income Subject to Taxation
Topic
Basis of Tax
Taxability of Persons and Transactions
Taxable Income
Date Issued
09-20-2001
September 20, 2001
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter regarding withholding Virginia income tax from your wages for the taxable years 1996 through 1999. I apologize for the delay in responding to your letter.
FACTS
You are a Virginia resident who received wages from employment. You state that you are not engaged in any revenue taxable activities, you had no liability for income taxes imposed under Subtitle A of Title 26 of the Internal Revenue Code in preceding years, you anticipate having no liabilities in the current year, and your wages are not subject to federal or Virginia income tax. Consequently, you state that you are not required to file federal or Virginia income tax returns for the taxable years 1996 through 1999. Accordingly, you have not filed returns for those years. The department has issued an assessment for the taxable year 1997. The department, however, has not issued assessments for the taxable years 1996, 1998, and 1999.
DETERMINATION
Code of Virginia § 58.1-301 (copy enclosed) provides that 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 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 Code of Virginia § 58.1-322 (copy enclosed).
Code of Virginia § 58.1-341 (copy enclosed) provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Code of Virginia
§ 58.1-321 (copy enclosed). Additionally, even if a resident is not required to file a federal return but has Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia income tax return. When a resident does not file a proper Virginia return, IRC § 6103 (d) (copy enclosed) authorizes the department to obtain information from the IRS that will help in determining the resident's tax liability.
Your claim that your wages are not subject to Virginia taxation has no basis in fact or Virginia laws. Further, a person who fails to file income tax returns based solely on such a claim has intentionally understated his or her income tax liability with the intent to evade tax and would be subject to a 100% fraud penalty pursuant to Code of Virginia § 58.1-308 (copy enclosed). Furthermore, one who files an application for correction pursuant to Code of Virginia § 58.1-1821 (copy enclosed) based solely on such claims has no purpose other than to hinder and delay collection of the proper tax liability. Consequently, collection activity need not be suspended on outstanding assessments while such applications for correction are being considered.
Based on the information presented, there is no basis to abate your assessment for the taxable year 1997, a summary of which is in the enclosed schedule. Additionally, your wages are not exempt from withholding taxes. You must pay the balance due on your assessment or file the appropriate Virginia tax return within the next 60 days. Additionally, any Virginia income tax returns that have not been filed for the taxable years 1996, 1998, and 1999 must be filed within the next 60 days. Your continued refusal to file any of your returns in accordance with Virginia law will justify the 100% fraud penalty and other legal actions to collect the proper tax. Tax payments and returns should be sent to *****, Policy Development Office, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880. If you have further questions, ***** may be contacted at *****.
If you wish to appeal this matter further, there is a judicial remedy under Code of Virginia § 58.1-1825 (copy enclosed). The court application must be filed within three years from the date of the assessments or one year from the date of this letter, whichever is the later. The assessments, however, must be paid or the appropriate bond posted before the court application is deemed filed.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner