Tax Type
Individual Income Tax
Description
Returns filed for informational purposes only
Topic
Constitutional Provisions
Statute of Limitations
Date Issued
10-05-2006
October 5, 2006
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessments issued to ***** (the "Taxpayers") for the taxable years 1995 through 1999. I apologize for the delay in responding to your appeal.
FACTS
In August 2004, the Taxpayers filed amended Virginia individual income tax returns with the Department for the taxable years 1995 through 2003. The amended returns were filed upon the discovery that some investment income had not been reported on the Taxpayers' original returns. Amended returns were also filed with the Internal Revenue Service. Payments for the tax due as shown on the amended Virginia income tax returns for the 1998 through 2003 taxable years were remitted with the returns.
The Department processed the amended returns and issued assessments for the 1995 through 1997 and 1999 taxable years. The Department determined that the 1998 amended return reflected an overpayment. The refund was not issued, but was applied against the balance due computed on the amended return filed for the 1996 taxable year. In addition, the payments remitted for the 1998 and 1999 taxable years were applied against the tax liability shown on the 1995 amended return.
The Taxpayers contend that the 1995 through 1997 taxable year returns were filed beyond the statute of limitations. They claim the returns were filed for informational purposes only, and the Department is barred from issuing assessments for those years. They further contend that they should be assessed interest only for the 1998 and 1999 taxable years. The Taxpayers, therefore, request that the assessments issued for the taxable years 1995 through 1997 be abated and the assessments issued for taxable years 1998 and 1999 be adjusted to show the correct amount due.
DETERMINATION
Virginia's conformity to federal law is set forth in Va. Code § 58.1-301, which provides that the terms used in the Virginia income tax statutes will have the same meanings as used in the Internal Revenue Code (I.R.C.). As such, Virginia's conformity to federal law is limited to the actual use of a specific term in a Virginia statute. Conformity does not extend to terms, concepts, or principles not specifically provided in Title 58.1 of the Code of Virginia.
Under I.R.C. § 6501(e), income tax may be assessed at any time within 6 years after the return was filed if a taxpayer omits income in excess of 25% of the amount of gross income stated in the return. Virginia Code § 58.1-311 specifically provides that a "taxpayer filing an amended federal income tax return shall also file within ninety days thereafter an amended return under this chapter and shall give such information as the Department may require." Because the Taxpayers filed amended federal income tax returns within the six-year statute of limitations period provided under I.R.C. § 6501(e), they are required to file amended Virginia returns and remit the additional assessment resulting from the omission of income in excess of 25% of gross income reported on the original return. Accordingly, the Taxpayers correctly filed amended returns and paid the tax due for the 1998 and 1999 taxable years.
Under Va. Code § 58.1-311, a taxpayer audited by the Internal Revenue Service or who files a federal amended return is required to report the changes to the Department within 90 days of the final determination of the change. If such amended returns are not filed, the Department may make an assessment of additional tax based on the federal adjustments at any time pursuant to Va. Code § 58.1-312.
For the 1995 through 1997 taxable years, the Internal Revenue Service made no assessments upon filing of the amended returns for those years because the returns were filed beyond the six-year limitations period under I.R.C. § 6501(e). Virginia Code § 58.1-311 would, therefore, not apply because the Internal Revenue Service made no changes to the federal returns filed by the Taxpayers for the 1995 through 1997 taxable years.
Accordingly, the assessments issued by the Department for the 1995 through 1997 taxable years will be abated in full. In addition, the 1998 and 1999 assessments will be adjusted as appropriate and the Taxpayer will receive a bill for the outstanding balance.
The Code of Virginia sections cited, along with other reference documents, are available online at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Janie E. Bowen-
- Tax Commissioner
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AR/56184E
Rulings of the Tax Commissioner