Tax Type
Individual Income Tax
Description
Taxpayer did not file a timely amended return
Topic
Statute of Limitations
Domicile
Date Issued
09-28-2006
September 28, 2006
Re: § 58.1-1821 Application: Individual Income Tax
Dear ********:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to ***** (the "Taxpayers") for the 2001 taxable year. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayers, a husband and wife, filed joint federal and Virginia resident individual income tax returns for the 2001 taxable year. The Internal Revenue Service ("I.R.S.") examined the Taxpayers' federal income tax return for the 2001 taxable year. Pursuant to the final determination by the I.R.S., the Taxpayers filed an amended Virginia income tax return. The return reflected a change in filing status from joint to separate because the husband was not a resident of Virginia in 2001.
Under review, the Department concluded that the statutory period for filing the 2001 amended return had expired for any reason other than changes resulting from a federal audit. The amended return was adjusted to reflect the federal audit adjustments and an assessment was issued. The Taxpayers claim that the husband was in the military and a domiciliary resident of another state. The Taxpayers request that the amended return be accepted as filed because it was filed within one year from the final federal determination.
DETERMINATION
Virginia Code § 58.1-311 provides that a taxpayer audited by the I.R.S. is required to file an amended return and report the changes to the Department within 90 days of the final determination of the change.
Virginia Code § 58.1-1823 provides, in pertinent part, that an amended return claiming a refund must be filed within the later of (i) three years from the last day prescribed by law for the timely filing of the return; (ii) one year from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the state tax is based, provided that the refund does not exceed the amount of the decrease in Virginia tax attributable to such federal change or correction.
In order for a refund to be permitted as a result of a federal adjustment, an amended return must be filed within one year from the final determination of the I.R.S. The Taxpayers contend that they filed their 2001 Virginia amended return within this time frame. Refunds under this provision, however, are limited to the decrease in Virginia income tax directly resulting from the federal change. In this case, the federal change resulted in additional federal adjusted gross income that resulted in an increase in Virginia income tax. Consequently, this provision of the statute does not apply to the Taxpayers' change in filing status.
According to Department records, the Taxpayers filed their amended 2001 Virginia income tax return on May 19, 2005. In order for the Taxpayers to change their filing status for the 2001 taxable year, an amended return must have been filed within three years of the return's due date, including extensions. See Public Document 84-245 (12/14/1984).
The Department has no record that the Taxpayers filed an extension for 2001. Consequently, the last day the Taxpayers could timely file an amended return to report the change in filing status was May 2, 2004 (May 1 being a Sunday). The Department was therefore correct to disallow the portion of the amended return unrelated to the change in federal taxable income reflected on the federal return.
Accordingly, the assessment issued by the Department for the 2001 taxable year is correct and remains due and payable. Payment of the outstanding balance due as shown on the enclosed schedule, should be paid to: Virginia Department of Taxation, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *****. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of this letter.
The Code of Virginia section cited, along with other reference documents, are available on-line 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
- Janie E. Bowen
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AR/56881E
Rulings of the Tax Commissioner