Tax Type
Individual Income Tax
Description
Taxpayers failed to file individual income tax returns.
Topic
Federal Conformity
Records/Returns/Payments
Date Issued
10-08-2009
October 8, 2009
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the Virginia individual income tax assessments issued to ***** (the "Taxpayers") for the taxable years ended December 31, 2001 through 2003. I apologize for the delay in responding to your letter.
FACTS
The Taxpayers are Virginia residents. The Department obtained information from the internal Revenue Service (I.R.S.) indicating that the Taxpayers received taxable income for the 2001 through 2003 taxable years and further, that the Taxpayers had failed to file federal individual income tax returns. The Department requested that the Taxpayers file the Virginia returns or provide an explanation concerning the taxable status of that income.
In response, the Taxpayers filed Virginia returns. The Department was, however, unable to verify their accuracy. Assessments were issued in absence of sufficient documentation to support the income and deductions reported. The Taxpayers appeal the assessments contending that they are arbitrary and beyond the authority of the Department.
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 Internal Revenue Code (I.R.C.) 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).
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 income tax return.
As a general rule, the Department relies on the accuracy of information and computations reflected on the federal income tax return when reviewing Virginia individual income tax returns. If the information provided on the federal return looks reasonable, there is generally no reason to look behind those computations. However, the Department retains the authority to adjust FAGI where there is clear evidence that the amounts reported on the federal or Virginia income tax return are not consistent with the I.R.C. See Va. Code § 58.1-219.
In the case at hand, the Taxpayers were contacted concerning delinquent Virginia income tax returns. When the delinquent Virginia returns were ultimately filed, the Department requested documentation from the Taxpayers to verify the information reported on the returns. Assessments were issued based on the information at hand when sufficient documentation was not provided.
During the course of this appeal, the Department has been able to verify that the Taxpayers filed federal income tax returns for the taxable years at issue. The return information provided by the I.R.S. is consistent with the Virginia returns provided to the Department by the Taxpayers. Based on the Department's analysis of the federal returns and the facts of this case, the Taxpayer's Virginia returns will be accepted as filed and the statutory assessments for the 2001 through 2003 taxable years will be adjusted accordingly.
The Taxpayers should be aware that should the I.R.S. make any changes to your federal income tax return affecting federal taxable income reported on that return, Va. Code § 58.1-311 requires that they report the change to the Department.
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 response, 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
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AR/1-879943594.E
Rulings of the Tax Commissioner