December 22, 2016
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 assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2012.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 taxable year. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. When a response was not received, the Department issued an assessment. The Taxpayer filed an appeal, contending he does not owe Virginia income tax.
DETERMINATION
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 (IRC) 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.
Under Va. Code § 58.1-341 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. When a resident does not file a proper Virginia return, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will help in determining the resident's tax liability. See Public Document (P.D.) 14-33 (3/7/2014).
The Taxpayer requested copies of his Federal Form W-2 because his employer could no longer provide a copy. In Public Document (P.D.) 96-394 (12/30/1996), the Department explained that the Agreement on Coordination of Tax Administration (the “Exchange Agreement”), which governs the exchange of tax information between the IRS and the Department, authorizes the IRS to periodically transmit reports of federal audits or examinations that have been conducted. The information received from the IRS by the Department on your account was obtained in this manner. Actual forms, documents, and certain data fields reported on Form W-2, are not included in this transmission.
Virginia statutes require its employers to report wages and remit Virginia withholding payments for all Virginia residents. In fact, the Department's records rely heavily on the withholding compliance of each Virginia employer. Federal records show the Taxpayer was employed by a California entity. The California employer may not be subject to Virginia's withholding requirements. The data, however, does show that the Taxpayer earned ***** in wages from his California employer and ***** in interest was reported by a Virginia financial institution.
Because the 2012 assessment was based on the federal record, the Taxpayer has the burden of proving the assessment to be invalid. The Taxpayer has not met this burden. The Taxpayer does not deny he received income for the taxable year, or his residency status with Virginia.
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 he was not subject to income tax in Virginia. Furthermore, 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 erroneous assessment is attributable to the taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.
The Department's assessment was issued based on information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayer may have additional information that may more accurately reflect his Virginia taxable income. Accordingly, the Taxpayer should file a Virginia income tax return for the 2012 taxable year. The return should be submitted 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 23261-7203, Attention: *****. Once the return is received, it will be processed and the assessment adjusted accordingly. If the return is not received within the allotted time, the Department's assessment will be considered to be correct as issued and collection actions will resume.
The Code of Virginia sections and public document 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 *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/643.D