Tax Type
Individual Income Tax
Description
Wage Earner Claims not Liable to File Individual Income Tax Returns
Topic
Persons Subject to Tax
Date Issued
11-02-2001
November 2, 2001
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter concerning your Virginia individual income tax for the taxable year ended December 31, 1996. Your letter is being treated as an appeal pursuant to Code of Virginia § 58.1-1821. 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 and that you had no liability for income taxes imposed under Subtitle A of Title 26 of the Internal Revenue Code ("IRC"). While your letter was addressed to this department, almost all tax references were made to the IRC or the Internal Revenue Service ("IRS"). You have requested that the assessment be abated and that you be exempted from employer withholding of individual income tax. You state that you are not subject to income taxation by the IRS or the Commonwealth of Virginia. A letter sent by the department concerning a Virginia individual income tax return for the 1996 taxable year indicated that the IRS had notified us that your income was subject to federal taxation.
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"). 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. 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.
The information provided in your letter shows that you are a resident of Virginia. The assessment issued for the 1996 taxable year based on the information provided by the IRS includes credit for Virginia income tax withheld by your employer. As stated earlier, wages reported on Form W-2 are included as income and are included in FAGI on the Virginia income tax return. Code of Virginia § 58.1-461, copy enclosed, provides that those wages are subject to employer withholding.
The claim set forth in your letter 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 find that you are exempt from Virginia individual income tax for the 1996 taxable year or exempt from having Virginia income taxes withheld from your wages. The assessment for the 1996 taxable year was made based on the information available, including allowing a credit for employer withholding, under the provisions of Code of Virginia § 58.1-111, copy enclosed. Additionally, department records do not reflect income tax returns for the 1997 through 2000 taxable years. Please file returns within the next 60 days. Refusal to file any of your returns in accordance with Virginia law will justify the 100% tax 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 1880, Richmond, Virginia 23218-1880. If you have further questions, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/30651E
Rulings of the Tax Commissioner