Tax Type
Individual Income Tax
Description
Taxpayer/VALLC failed to timely file Virginia income tax returns for the taxable years
Topic
Records/Returns/Payments
Statute of Limitations
Date Issued
08-28-2014
August 28, 2014
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, 2008 through 2011. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is the sole owner of ***** (VALLC). The Taxpayer and the VALLC failed to timely file Virginia income tax returns for the 2009 through 2011 taxable years. Under audit, the Department used information provided by the Internal Revenue Service (IRS) to estimate the Taxpayer's taxable income and issue assessments. The Taxpayer appeals the assessments, claiming VALLC was closed and questioning the accuracy of the information relied upon by the Department. In addition, the Taxpayer disputes a penalty assessment for the 2008 taxable year.
DETERMINATION
Statute of Limitations
The Taxpayer filed a 2008 return after May 1, 2009. The Department issued an assessment for late filed penalties and interest. The Taxpayer believes that he timely filed a return.
Virginia Code § 58.1-1821 provides that "[a]ny 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.] Title 23 of the Virginia Administrative Code (VAC) 10-20-165 provides additional requirements regarding the timely filing of administrative appeals. This regulation provides information to taxpayers about the process for appealing tax assessments, including how to file a complete and timely administrative appeal.
The Taxpayer filed an appeal for the 2008 taxable year with the Department by letter dated July 5, 2013. The assessment issued for the 2008 taxable year was issued in December 2009. The statutory period for filing an appeal for the 2008 taxable year under the provisions of Va. Code § 58.1-1821 expired well before the appeal was filed. As such, the Taxpayers' administrative appeal for the 2008 taxable year is barred by the statute of limitations.
The assessments for the taxable years 2009 through 2011 were issued in March 2013. The appeal for these taxable years was filed within the statutory period for filing an appeal and will be addressed below.
Filing Returns
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. Under this statute, the due date for calendar year taxpayers to file their individual income tax return is May 1 of the year following the year unless an extension is elected in accordance with Va. Code § 58.1-344. In this case, the Taxpayer failed to file returns for the 2009 through 2011 taxable years.
Estimated Assessments
Because no returns had been filed, the Department obtained information from the IRS concerning the Taxpayer's income. IRC § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine the resident's tax liability. When a taxpayer fails to file a Virginia income tax return, Va. Code § 58.1-111 grants the Department the authority to issue assessments based on the information made available.
For the 2009 through 2011 taxable years, the Department made several requests for specific documents required to ascertain the Taxpayer's income for each taxable year. When no response was received, the Department issued assessments based on information received from the IRS.
Subsequently, the Taxpayer submitted a 2009 income tax return. The Department requested additional information to support the income reported. Because no documentation has been provided, the Department has not adjusted the 2009 assessment.
CONCLUSION
Pursuant to Va. Code § 58.1-111, the Department issued estimated assessments based on available information when the Taxpayer failed to provide documents to accurately reflect his Virginia taxable income for the 2009 through 2011 taxable years. In addition, the Taxpayer's appeal for the 2008 assessment was not timely filed.
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 Taxpayer to show they had no Virginia taxable income. Further, Va. Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the assessment was attributable to a taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.
Based on the information available, there is no basis to revise or abate the Department's assessments issued for the 2008 through 2011 taxable years. The Taxpayer may, however, have additional information that more accurately reflects his Virginia taxable income. Accordingly, the Taxpayer is requested to file Virginia income tax returns for the 2010 through 2011 taxable years and provide supporting documents in order to more accurately reflect his Virginia income tax liability for the 2009 through 2011 taxable years.
The Taxpayer should send the requested returns along with supporting documents within 30 days of the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23218-7203, Attention: *****. Once the documents are received, they will be processed and the assessments will be
adjusted as appropriate. If the documents are not filed within the allotted time, the assessments will be considered to be correct as issued and collection action will resume.
The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5452220192.D
Rulings of the Tax Commissioner