Tax Type
Individual Income Tax
Description
Income from employment is not subject to Virginia taxation
Topic
Persons Subject to Tax
Date Issued
10-01-2004
October 1, 2004
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letters regarding the Virginia individual income tax assessments issued to you for the taxable years 2000 and 2001. I apologize for the delay in the Department's response.
FACTS
You are a Virginia resident who received wages from employment. You contend that you did not have any "income" as defined in the Internal Revenue Code ("IRC"). Consequently, you believe that you are not required to file federal or Virginia income tax returns.
The Department has received information from the Internal Revenue Service ("IRS") indicating that you had income for the 2000 and 2001 taxable years. Letters were sent to you requesting that you file the proper Virginia returns or provide an explanation concerning why your income was not taxable. When an adequate response was not received, the department issued assessments.
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 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 individual 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 enable the Department to determine the resident's tax liability.
Your claim that your income from employment is not subject to Virginia taxation 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. You are hereby requested to file individual income tax returns for the 2000 and 2001 taxable years and any other delinquent income tax returns 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.
Returns or payments may be sent to the attention of ***** in the Department's Office of Policy and Administration, Appeals and Rulings, P. O. Box 27203, Richmond, Virginia 23261-7203.
The Code of Virginia sections cited 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, ***** may be contacted at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/48777E
Rulings of the Tax Commissioner