Tax Type
Individual Income Tax
Description
Assessment was issued to recover the erroneous refund.
Topic
Federal Conformity
Returns and Payments
Statute of Limitations
Date Issued
08-06-2010
August 6, 2010
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you appeal an individual income tax assessment issued to ***** (the "Taxpayer") for the 2008 taxable year. I apologize for the delay in responding to your letter.
FACTS
In 2006, the Department issued an assessment against the Taxpayer for failing to timely file a Virginia individual income tax return for the 2003 taxable year. A similar assessment was issued in 2007 for the 2004 taxable year. In October 2008, the Taxpayer filed the required returns, and the assessments were abated.
Prior to receiving the returns, the Department submitted the 2003 and 2004 income tax debts to the Treasury Offset Program (TOP) to offset federal income tax refunds. Before the Department could notify the United States Department of Treasury that the assessments had been satisfied, it withheld eligible federal tax refunds to offset the income tax liabilities. Because there were no assessments to which the TOP offset payments could be applied, they were applied to the 2008 taxable year and refunded to the Taxpayer.
When the United States Department of Treasury was notified that the assessments had been abated, it reversed the TOP offset payment and the Department remitted the funds back to the United States Treasury. In November 2009, an assessment was issued to the Taxpayer for the funds erroneously refunded to him. The assessment was not satisfied within 30 days, and the Department began collection procedures against the Taxpayer. The Taxpayer appeals the assessment.
DETERMINATION
Virginia Code § 58.1-312 provides that an erroneous refund is considered to be an underpayment of tax, which can be assessed by the Department within two years from the date the erroneous refund was made. Title 23 of the Virginia Administrative Code (VAC) 10-110-90 B 7 b defines the term "erroneous refund" as "the issuance of refund to which a taxpayer is not entitled."
In this case, the Department issued assessments when the Taxpayer failed to file appropriate individual income tax returns and submitted the assessments under TOP as permitted. Because of the timing of the filing of the Taxpayer's 2003 and 2004 returns, the TOP offset payments were erroneously issued to the Taxpayer, who cashed the checks.
Because the Department was required to submit the TOP offset payments back to the federal government, an assessment was issued to recover the erroneous refund. When payment of the assessment was not received within 30 days, additional interest was added, as provided under Va. Code § 58.1-1812 B.
Accordingly, the Virginia income tax assessment issued for the 2008 taxable year is correct. An updated bill will be forwarded to you. Payment of the outstanding balance should be remitted to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention *****.
The Code of Virginia sections and regulations cited 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, please contact ***** at *****.
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- Sincerely,
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- Linda Foster
Deputy Tax Commissioner
- Linda Foster
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AR/1-4198411148.D
Rulings of the Tax Commissioner