04-164 | Virginia Tax

Tax Type

Individual Income Tax

Description

Taxpayer has zero FAGI for the year 1999, and zero VA taxable income

Topic

Basis of Tax

Collection of Tax

Date Issued

10-01-2004

October 1, 2004

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This will reply to your letter in which you seek correction of the Virginia individual income tax assessment issued to********* (the "Taxpayer") for the taxable year ended December 31, 1999. I apologize for the delay in responding to your letter.

FACTS

The Department obtained information from the Internal Revenue Service ("IRS") indicating that the Taxpayer, a Virginia resident, received taxable income for the 1999 taxable year. A review of the Department's records indicated the Taxpayer had not filed a Virginia individual income tax return for the 1999 taxable year. The Taxpayer was advised of the information provided by the IRS; however, the Taxpayer failed to provide Virginia income tax returns or other documentation showing that the information provided by the IRS was incorrect. As a result, the Department issued an assessment based on the available information. The Taxpayer asserts that the assessment is not valid because the Virginia taxable income is based upon federal adjusted gross income for the taxable year, and the IRS has not yet responded to his query concerning whether he is subject to any "class of tax" administered by the IRS.

DETERMINATION

Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia 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. When a resident does not file a Virginia return, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will help in determining the resident's tax liability. Additionally, even if a resident is not required to file a federal return but has sufficient Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia income tax return pursuant to Va. Code § 58.1-341.

In the case at hand, the Department issued an individual income tax assessment to the Taxpayer for failure to file a 1999 individual income tax return. The Taxpayer contends that the failure of the IRS to respond to his questions "constitutes a tacit admission that I am not required to keep books and records and file returns, and that I have no liability for any given class or classes of tax administered by the IRS for the years at issue in my original request, 1992 through 2002." Therefore, the Taxpayer believes he has zero FAGI for the year 1999, and zero Virginia taxable income."

A review of the information available indicates that the Taxpayer does not dispute receiving the income reported to the Department by the IRS. The Taxpayer bases his position solely on the fact that the IRS has not yet responded to his request. The Taxpayer has not shown that a 1999 Virginia individual income tax return was filed or that the information provided by the IRS is incorrect. Pursuant to Va. Code § 58.1-111, the Department has the authority to estimate the amount of taxes due when a taxpayer fails to file a valid state tax return. Virginia Code § 58.1-312 further provides that an assessment can be issued at any time if a return is not filed. Finally, Va. Code § 58.1-205 provides that any assessment of a tax by the Department shall be deemed prima facie correct.

The Taxpayer has failed to provide objective evidence as to the correct liability for the taxable year at issue. Your claim that the Taxpayer is not subject to Virginia taxation has no basis in fact or Virginia laws. Based on the information provided, there is no basis to abate the Virginia individual income tax assessment for the 1999 taxable year. A schedule is enclosed showing the balance of the assessment.

You are requested to file a Virginia individual income tax return for the 1999 taxable year, along with any other delinquent income tax returns, within 30 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. In addition, failure to submit full payment within this 30-day period may also result in the imposition of an additional 20% penalty on the tax due under the terms of Virginia's recent Amnesty. See the enclosure entitled "Important Payment Information."

Returns and payments may be sent to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *****.

The Code of Virginia sections cited and other reference documents 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 any questions regarding this determination, you may Contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Kenneth W. Thorson
        Tax Commissioner

AR/44895E

Rulings of the Tax Commissioner