Tax Type
Individual Income Tax
Description
Tax Protestor; Claims to be Exempt from Withholding
Topic
Persons Subject to Tax
Date Issued
10-31-2001
October 31, 2001
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter concerning your Virginia individual income tax assessment for the taxable year ended December 31, 1996. Your letter is being handled as an application pursuant to Code of Virginia § 58.1-1821, copy enclosed. 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, had no liability for income taxes imposed under Subtitle A of Title 26 of the Internal Revenue Code ("IRC") in preceding years, anticipate having no liabilities in the current year, and your wages are not subject to federal or Virginia income tax. You contend that you are not required to file federal or Virginia income tax returns for the 1996 taxable year. A letter sent by the department for the 1996 taxable year indicated that a federal audit had been conducted, and your income was subject to federal taxation. You have requested abatement of the Virginia individual income tax assessment for the 1996 taxable year. Inasmuch as the assessment has been paid, this will be considered as a request for refund.
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 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"). IRC § 61(a)(1) and the associated Treasury Regulation § 1.61-2, copy enclosed, specifically include wages and salaries in the definition of gross income. IRC § 61(b) also cross-references other income that is included in the definition of gross income (IRC §§ 71 through 90). Consequently, wages, salaries and other income included in FAGI are subject to taxation by Virginia.
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 income is 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 grant exemption from the Virginia individual income tax for 1996, nor are you exempt from having income taxes withheld from your wages. Additionally, any Virginia income tax returns that have not been filed based on these claims should be filed within the next 60 days. 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.
Returns and tax payments should be sent to the attention of ***** Department of Taxation, Office of Policy and Administration, Appeals and Rulings, Post Office Box 1880, Richmond, Virginia 23218-1880. If you have any further questions, you may contact ***** at ******.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/30287E
Rulings of the Tax Commissioner