09-26 | Virginia Tax

Tax Type

Individual Income Tax

Description

Failure to file timely amended VA individual income tax returns after IRS adjustment

Topic

Federal Conformity

Date Issued

02-13-2009

February 13, 2009

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This will reply to your letter concerning the Virginia individual income tax assessments issued to ***** (the "Taxpayers") for the taxable years ended December 31, 2003, 2004 and 2005. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayers are Virginia residents. Their federal individual income tax returns for the 2003 through 2005 taxable years were audited by the Internal Revenue Service (IRS), resulting in a change to federal taxable income and assessments of additional tax. The Taxpayers failed to file timely amended Virginia individual income tax returns after the IRS adjusted their federal returns, or after the Department notified them that, in light of IRS information, that such filings were required. Based on the IRS information, the Department assessed additional tax for the 2003 through 2005 taxable years.

The Taxpayers submitted letters of appeal to the Department and to the IRS, contending: (1) the income was over reported, (2) the Taxpayers were not required to file individual income tax returns because they are not "individuals," (3) the federal assessments are not valid because they are not backed by a summons by a federal court, and (4) the Department has not provided them with proof that they owe the IRS.

DETERMINATION

Taxable year 2003

Virginia Code § 58.1-1821 states, "Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner." [Emphasis added.] Pursuant to the Department's Administrative Appeal Guidelines (the "guidelines") § 3 A, "The 90-day limitations period begins on the calendar day after the date of assessment and continues for 90 consecutive calendar days (including weekends and holidays)." See Public Document (P.D.) 06-140 (11/29/2006).

In this case, the assessment for the 2003 taxable year was issued to the Taxpayer on June 8, 2007 and appealed by letter postmarked March 25, 2008. Pursuant to Va. Code § 58.1-1821, the Taxpayer failed to file a complete administrative appeal with the Department within the 90-day limitations period for the 2003 taxable year. Therefore, the Taxpayer's application for correction of the 2003 taxable year assessment is barred by the statute of limitations. The Virginia individual income tax assessment for the 2003 taxable year is correct and remains due and payable.

Taxable years 2004 and 2005

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 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). Income included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.

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 individual income tax return. When a resident does not file a proper Virginia return, Internal Revenue Code § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine the resident's tax liability.

Under Va. Code § 58.1-311, if a taxpayer's federal taxable income is changed or corrected by the IRS, the taxpayer is required to report the changes to the Department within one year after the final determination of the change or correction. If Virginia amended returns are not filed or the changes to federal taxable income are not otherwise reported, the Department is authorized to make an assessment of additional tax based on the federal adjustments pursuant to Va. Code § 58.1-312.

The Taxpayers have not provided evidence to show that the information properly obtained by the Department from the IRS is incorrect or that their income is not subject to taxation by Virginia. In one letter, they indicate that the IRS is no longer seeking payment of deficiencies, but have failed to provide any evidence to that effect.

Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayers to show that the assessment is incorrect. The Taxpayers have not met this burden.

CONCLUSION

Accordingly, the assessments for the 2003 through 2005 taxable years are upheld. Payment of the outstanding assessments, as shown on the enclosed schedule, should be made within 30 days from the date of this letter. Payment should be sent to: Virginia Department of Taxation, Office of Tax Policy Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. If payment is not received within the allotted time, interest will accrue on the outstanding balance and collection action will resume.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department of Taxation's web site. If you have any questions about this determination, please contact ***** at *****.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/1-2206548348.E

Rulings of the Tax Commissioner