Tax Type
Individual Income Tax
Description
Taxpayer had income for the taxable years at issue and did not file income tax returns
Topic
Corporate Distributions and Adjustments
Persons Subject to Tax
Records/Returns/Payments
Date Issued
10-16-2009
October 16, 2009
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 "Taxpayer"), for the taxable years ended December 31, 2004 through 2006.
FACTS
The Taxpayer was the president of ***** (the "Corporation"). The Taxpayer filed individual Virginia income tax returns for the 2004 and 2005 taxable years, but did not file for the 2006 taxable year.
Under audit, the Department determined that the Taxpayer was depositing money from unreported sales into her personal bank accounts. The Department assessed tax, penalty and interest against the Taxpayer for the 2004 through 2006 taxable years. The Taxpayer appeals the assessments, contending she was not working during the taxable years at issue.
DETERMINATION
In conducting an audit, the Department may examine a taxpayer's accounting records, when possible, to determine the nature of income and expense items. See Va. Code § 58.1-103. Further, Va. Code § 58.1-111 states:
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- Whenever any taxpayer liable under the law to file a state tax return with the Department shall fail or refuse on demand to file a correct and proper return, the Department may make an estimate of the amount of taxes due the Commonwealth by such taxpayer, from any information in its possession, and assess the taxes, penalties and interest due the Commonwealth by such taxpayer.
When a taxpayer is required to file an income tax return and fails or refuses to file the return, or files an improper return, the Department may estimate the tax, penalty and interest based on any information, including subpoenaed record, in its possession.
In the instant case, the auditors subpoenaed the corporation and Taxpayer bank account records, pursuant to Va. Code § 58.1-216. An analysis was made of deposits and disbursements from these bank accounts, and an audit report based on information available was issued to the Taxpayer.
The Taxpayer contends she did not work during 2004, 2005, or 2006. However, the Corporation issued Form W-2 statements to the Taxpayer for each of the taxable years at issue. In addition, the Taxpayer was the president of the Corporation during the taxable years at issue according to the State Corporation Commission. 'She also signed the Corporation's 2004 and 2005 income tax returns in her capacity as president. These activities are indicative of an individual fully engaged in operating a business.
Based on a review of the information provided, the Taxpayer had income for the taxable years at issue. The assessments of tax liabilities for the years at issue are based on the best information available, including monthly deposits made to the Taxpayer's individual bank account. The Taxpayer has not shown that the assessments are not correct. Accordingly, the Taxpayer's request for an abatement of the tax assessments is denied. Revised bills, with accrued interest, will be mailed to the Taxpayer. No additional interest will accrue provided the outstanding assessments are paid within 30 days from the date of the revised bills. The Taxpayer should remit payment to; Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 21203, Richmond, Virginia 23261, Attn: *****.
The Code of Virginia sections and public document 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 regarding this determination, you may contact ***** at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-3328243372.B
Rulings of the Tax Commissioner