Tax Type
Individual Income Tax
Description
Intent to evade filing income tax is subject to a 100% fraud penalty
Topic
Persons Subject to Tax
Date Issued
04-26-2005
April 26, 2005
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 2001 and 2002 taxable years. Your letter is being treated as an application for correction pursuant to Va. Code § 58.1-1821.
FACTS
You are a Virginia resident who received wages from employment. The Department received information from the Internal Revenue Service ("IRS") indicating that you had income for the 2001 and 2002 taxable years. Letters were sent to you requesting that you file the proper Virginia individual income tax returns or provide an explanation concerning why your income is not taxable. When an adequate response was not received, the Department issued assessments based on the information available.
You contend that you did not have any "income" as that term is used in the 16th Amendment to the U.S. Constitution or as defined in the Internal Revenue Code ("IRC"). You further state that you are not in receipt of any document that verifies you are subject to and liable for any tax the IRS is attempting to collect. Consequently, you believe that you are not required to file federal or Virginia income tax returns.
DETERMINATION
Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Virginia Code 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 is 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 2001 and 2002 taxable years are correct. The assessment for the 2001 taxable year has been paid, but the assessment for the 2002 taxable year remains due and payable. Payment of the outstanding assessment, 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 27203, Richmond, Virginia 23261-7203, Attention: *****.
In addition, you are hereby requested to file any other delinquent individual 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. Delinquent income tax returns should be sent to ***** at the address shown above.
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.policylibrary.tax.virginia.gov. 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/54663E
COMMONWEALTH o f VIRGINIA
Department of Taxation
TO WHOM IT MAY CONCERN:
Department of Taxation
TO WHOM IT MAY CONCERN:
Under the authority of §§ 58.1-1 and 58.1-110 of the Code of Virginia, I hereby delegate to Gerald Gwaltney, Deputy Tax Commissioner, the authority to sign for me, in my absence, any and all documents, including, but not limited to, affidavits, warrants, rulings, appeals, offers in compromise and sales tax revocations.
This authority shall not extend to matters or documents related to my service on any statutorily created board or commission, including, but not limited to, the Compensation Board and Treasury Board.
This authority shall become effective January 10, 2003, and shall remain in effect until revoked.
Done at Richmond, Virginia, this 13th day of January 2003.
Kenneth W. Thorson
Tax Commissioner
Acknowledgement: Gerald H. Gwaltney Date: 9-30-03
Done this 13th day of January 2003 in the City of Richmond, State of Virginia. My Commission expires 9-30-2003.
Sylvia J. Wesson
Notary Public Notary Seal
Rulings of the Tax Commissioner