Tax Type
Individual Income Tax
Description
Failure to file income tax returns with the intent to evade tax
Topic
Collection of Delinquent Tax
Penalties and Interest
Persons Subject to Tax
Taxable Income
Date Issued
04-15-2002
April 15, 2002
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter concerning an assessment of Virginia individual income tax issued to ***** (the "Taxpayer") for the taxable year ended December 31, 1998. Your letter has been treated as an application for correction of an erroneous assessment pursuant to Code of Virginia § 58.1-1821.
FACTS
The Taxpayer, a Virginia resident who received wages from employment, contends these wages are not subject to federal or Virginia income tax. Consequently, the Taxpayer believes that he is not required to file federal or Virginia income tax returns for the 1998 taxable year. The department has issued an assessment for that year based on the Taxpayer's failure to file the appropriate income tax return for 1998. The Taxpayer contests the assessments, claiming that his wages are property and not subject to income taxation.
DETERMINATION
Code of Virginia § 58.1-301 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. The Virginia individual income tax "conforms" to federal law because 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.
Code of Virginia § 58.1-341 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. Code of Virginia § 58.1-302 specifically defines "resident" to include every person domiciled in Virginia and every person who maintains a place of abode in Virginia for an aggregate of more than 183 days of the taxable year. 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) authorizes the department to obtain information from the Internal Revenue Service that will help in determining the resident's tax liability.
You have provided no documentation to show that you were not subject to income tax as a Virginia resident for the 1998 taxable year. 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 is subject to a 100% fraud penalty pursuant to Code of Virginia § 58.1-308. Further, one who files an application for correction pursuant to Code of Virginia § 58.1-1821, 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 provided, there is no basis to abate the Virginia individual income tax assessment for the 1998 taxable year. As a Virginia resident, you are subject to Virginia taxation and must file a Virginia income tax return for the taxable year 1998 and for any taxable year, including years prior to or subsequent, for which the proper Virginia income tax returns have not been filed. Further action in your case will be held in abeyance for 60 days awaiting the filing of your 1998 Virginia income tax return.
Please submit your Virginia individual income tax returns along with the payment of any liability within 60 days from the date of this letter to the attention of ***** Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, Post Office Box 1880, Richmond, Virginia 23218-1880. If the returns are not received within the time allowed, the assessment for the 1998 taxable year will become immediately due and payable, and collection action will resume.
If you wish to appeal this matter further, you may seek a judicial remedy pursuant to Code of Virginia § 58.1-1825. 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 later. The assessments, however, must be paid or the appropriate bond posted before the court application is deemed filed.
Copies of the Code of Virginia cited are included for reference purposes. This and other reference documents are also available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions regarding this matter, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/38319E
Rulings of the Tax Commissioner