Tax Type
Individual Income Tax
Description
Individual subject to Virginia Income tax, justify the 100% fraud penalty
Topic
Persons Subject to Tax
Taxable Income
Date Issued
09-16-2004
September 16, 2004
Re: § 58.1-1821 Application: Individual Income Tax
Dear *********:
This will reply to your letter concerning the Virginia individual income tax assessment issued to you for the 1998 and 1999 taxable years. Your letter is being treated as an application for correction pursuant to Va. Code § 58.1-1821. I apologize for the delay in this response.
FACTS
The facts presented indicate that you are a Virginia resident. The Department received information from the Internal Revenue Service ("IRS") indicating that you had income for the 1998 and 1999 taxable years. Letters were sent requesting that you file the proper Virginia returns or provide an explanation to support your claim that your income was not taxable. When an adequate response was not received, the Department issued assessments for the 1998 and 1999 taxable years. You state that the assessments are fraudulent and unsubstantiated.
DETERMINATION
Virginia Code § 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. 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 Va. Code § 58.1-322.
Virginia Code § 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 Va. Code § 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 the assessments issued are fraudulent and unsubstantiated has no basis in fact or Virginia law. 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 Va. Code § 58.1-308.
Additionally, anyone who files an application for correction pursuant to Va. Code § 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 while such applications for correction are being considered.
Based on the applicable law cited above and the information presented, there is no basis to find that you are not subject to Virginia income taxation on your income. Accordingly, the assessments for the 1998 and 1999 taxable years are correct and remain due and payable. Payment of the outstanding assessments for the 1998 and 1999 taxable years, as shown on the enclosed schedule, should be sent to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, Post Office Box 1880, Richmond, Virginia 23218-1880, Attention: *****.
In addition, you are hereby requested to file individual income tax returns that are delinquent for the taxable years subsequent to 1999 within 45 days from the date of this letter. Refusal to file the requested returns or any future returns in accordance with Virginia law by continuing to make the claims you have stated in your letter would justify the 100% fraud penalty and other legal actions to collect the proper tax. Delinquent income tax returns should be sent to ***** at the address shown above.
The Code of Virginia sections and regulations relating to individual income tax, which are the basis for the assessment issued to you, are available on-line in the Tax Policy Library section of the Department's web-site, located at www.tax.state.va.us. If you have further questions, please contact ***** at *****.
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- Sincerely,
Kenneth W. Thorson
Tax Commissioner
- Sincerely,
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AR/44297E
Rulings of the Tax Commissioner