June 29, 2017
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 years ended December 31, 2012 through 2014.
FACTS
The Taxpayer was audited by the Internal Revenue Service (IRS) for the taxable years at issue. The IRS notified the Department of adjustments it made to the Taxpayer's federal income tax returns. The Taxpayer failed to file amended Virginia income tax returns reflecting the IRS adjustments. As a result, the Department issued assessments based on the IRS information. The Taxpayer filed an appeal, contending she submitted documents to the IRS to refute the adjustments.
DETERMINATION
Virginia Code § 58.1-311 requires any individual to report a change or correction in federal taxable income within one year of the final determination of such change or correction by filing an amended return with the Department. If the taxpayer fails to file an amended return reflecting the federal adjustment, Va. Code § 58.1-312 A 3 permits the Department to assess the appropriate tax at any time.
Where the Internal Revenue Service (IRS) has audited the federal taxable income of a taxpayer, the Department does not look behind the IRS's final determination. See Public Document (P.D.) 11-107 (6/14/2011). The Department adjusted the Taxpayer's 2012 through 2014 income tax liability based on federal information available from the IRS as permitted by statute. The Taxpayer has failed to show the Department's assessments are incorrect.
Accordingly, the Department's assessments are upheld. The Taxpayer will receive an updated bill with accrued interest to date. The bill should be paid within 30 days of the bill date to avoid the accrual of additional interest.
Under Title 23 of the Virginia Administrative Code (VAC) 10-20-180 B, a final determination of a change in liability for the federal tax includes, with certain exceptions, the refund by the IRS of any federal income or estate tax. A final determination may also include a copy of an RAR, Form 870, 90-day letter, closing agreement, or court decision. Thus, under Title 23 VAC 10-20-180 B, a taxpayer may have more than one final determination for a given taxable year. Therefore, if the IRS adjusts its audit findings for the taxable years at issue, the Taxpayer will be permitted to file amended returns to correct her liability pursuant to Va. Code § 58.1-311 and Va. Code § 58.11823 A (ii).
The Taxpayer states that she has begun bankruptcy proceedings and that the IRS assessments may be included in the bankruptcy. Some or all of the Taxpayer's Virginia income tax assessments may be dischargeable in bankruptcy. Please contact of the Department's bankruptcy collections unit at (804) 367-8045 if you have any questions regarding payment.
The Code of Virginia sections, regulation, 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 Department's Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1191.B