Tax Type
Individual Income Tax
Description
Wife's refunds to offset tax liabilities is entitled to relief as an innocent spouse
Topic
Records/Returns/Payments
Taxpayers
Withholding of Tax
Date Issued
04-17-2008
April 17, 2008
Re: § 58.1-1824 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you appeal the Department's seizure of the 2004 and 2006 individual income tax refunds for ***** (the "Taxpayers") to satisfy delinquent Virginia tax liabilities.
FACTS
The Taxpayers (a husband and wife) filed joint Virginia income tax returns reporting tax overpayments for the taxable years at issue. The Department used the refunds to offset tax liabilities resulting from penalties assessed under Va. Code § 58.1-1813 against the husband for liabilities accrued by two businesses from 1989 through 1994.
You (the "wife") contend that your husband accrued the tax liabilities before you were married and the wife is entitled to relief as an innocent spouse. The wife requests that the portion of the refunds resulting from taxes paid by her be refunded.
DETERMINATION
Protective Claim
Pursuant to the authority granted the Tax Commissioner under Va. Code § 58.1-1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Va. Code § 58.1-1821. As permitted by statute, the wife's request has been treated as an appeal under Va. Code § 58.1-1821.
Innocent Spouse
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 (IRC). 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 federal law, a husband and wife are jointly and severally liable for the entire income tax on a joint return. Under § 6015 of the IRC, in certain circumstances when a spouse intentionally hides income or otherwise falsifies a return, relief from joint liability is accorded to an innocent spouse.
The Code of Virginia does not contain a provision that includes the term that addresses an "innocent spouse." Accordingly, the Department is not required to follow the federal innocent spouse rule.
Joint Liability
Virginia Code § 58.1-341 B 1 provides that a husband and wife who file a joint tax return are liable jointly and individually for their tax liabilities. Title 23 of the Virginia Administrative Code (VAC) 10-110-240 C 3 b provides that joint and several liability "means that each party to the return is individually liable for its contents and the entire tax liability arising therefrom . . . .' Therefore, each spouse is liable for the tax liability arising from the joint return.
In this case, the wife did not file joint returns with her spouse during the 1989 through 1994 taxable years. In fact, the wife was not married to her husband during the years that the husband's tax liability was accrued. None of the husband's converted assessments were accrued during the 2004 and 2006 taxable years.
It has been the Department's policy to not hold one spouse liable for past tax liabilities of the other spouse accrued in years before a return was jointly filed. As such, the wife is not liable for the husband's converted tax assessments. Therefore, the wife is entitled to a refund of the tax overpayment stemming from her income accrued during the 2004 and 2006 taxable years.
A refund will be issued shortly for the amount of tax paid by the wife. The Code of Virginia sections and regulation cited, as well as forms and 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 regarding this determination, you may contact ***** in the Office of Tax Policy, 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/1-1805961334B
Rulings of the Tax Commissioner