Tax Type
Individual Income Tax
Description
Department disallowed itemized deductions/Taxpayer v Preparer responsible returns.
Topic
Records/Returns/Payments
Taxpayers
Date Issued
05-31-2011
May 31, 2011
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of individual income tax assessments issued to ***** (the "Taxpayer") for the taxable years ended December 31, 2007 and 2008.
FACTS
The Taxpayer is a Virginia resident who filed individual income tax returns for the taxable years at issue. Under audit, the Department disallowed itemized deductions for charitable contributions, job expenses, and certain miscellaneous expenses. The Department also adjusted the Taxpayer's mortgage interest deduction.
The Taxpayer appeals the assessments, contending she relied on the expertise of the tax preparer to complete the returns properly. The Taxpayer concedes that the itemized deductions reported were incorrect, but believes the tax preparer should be held responsible for the incorrectly completed returns.
DETERMINATION
Virginia's taxing system is based largely on the theory of self assessment. A taxpayer computes his own income and tax, fills out his own return, files the return, and pays the tax indicated. Virginia has implemented a self-assessment system based on the federal system because it is, less intrusive upon taxpayers, simpler, and less costly to administer. Consequently, taxpayers are responsible for the information provided on income tax returns.
The Taxpayer knew or should have known she did not incur the expenses on which the tax preparer based the deductions. As such, the undocumented deductions reported on the tax returns cannot be excused by the Taxpayer's reliance on the tax preparer.
Further, in a situation where a taxpayer relies on an accountant, lawyer, tax preparer or other tax professional and such professional provides inaccurate or erroneous advice that results in a penalty, the taxpayer has recourse against the tax professional for the error. The Department does not have the authority to assess the taxpayer's liability against the tax preparer in such circumstances.
The Taxpayer's reliance on the tax preparer in preparing the 2007 and 2008 income tax returns, while understandable, does not relieve her of the responsibility for ensuring that the information reported on the return is accurate. Accordingly, the assessments are upheld.
A schedule is enclosed showing the outstanding balance. No additional interest will accrue provided the total outstanding balance is paid within 30 days from the date of this letter. Payment should be sent to: Virginia Department of Taxation, Attention: *****, Office of Tax Policy, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23218-7203.
If you have any questions regarding this response, you may contact ***** at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-4592301935.E
Rulings of the Tax Commissioner