Tax Type
Individual Income Tax
Description
Refusal to file returns
Topic
Collection of Delinquent Tax
Collection of Tax
Persons Subject to Tax
Withholding of Tax
Date Issued
04-16-2002
April 16, 2002
Re: Ruling Request: Individual Income Tax
Dear *****:
This will reply to your letter regarding withholding Virginia income tax from your wages and your income tax liability for the 1999 taxable year. 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 ("IRC") 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. Additionally, you have submitted an Employee's Virginia Income Tax Withholding Exemption Certificate, Form VA-4, claiming to be exempt from Virginia withholding tax for the 1999 taxable year. Accordingly, you have not filed a tax return for that year and claim to be exempt from Virginia withholding tax.
RULING
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 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.
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. 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 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 law. 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.
Based on the applicable law cited above and the information presented, there is no basis to grant your request to be exempt from filing a Virginia individual income tax return or from Virginia withholding taxes on wages for the 1999 taxable year. The Taxpayer is hereby requested to file individual income tax returns for the 1999 and 2000 taxable years within 45 days from the date of this letter. Refusal to file the requested returns and any future returns in accordance with Virginia law by continuing to make the claims you have stated in your letter would justify the 100/o fraud penalty and other legal actions to collect the proper tax.
Returns or payments may be sent to the attention of *****, Office of Policy and Administration, Appeals and Rulings, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880. The withholding exemption certificate, Form VA-4, that you submitted is void and should not be provided to any of your employers.
Copies of the Code of Virginia and IRC citations are included for reference purposes. These and other reference documents are also available online in the Tax Policy Library section of the department's web site, located at www.tax.state.va.us. If you have further questions, ***** may be contacted at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/27328E
Rulings of the Tax Commissioner