August 23, 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 year ended December 31, 2013.
FACTS
The Taxpayer was audited by the Internal Revenue Service (IRS) for the 2013 taxable year. The Taxpayer failed to file an amended Virginia income tax return reflecting the IRS adjustments. As a result, the Department issued an assessment based on the IRS information. The Taxpayer filed an appeal, contending he is appealing the IRS audit. The Taxpayer also requests an abatement of any penalties and interest applied to the assessment.
DETERMINATION
IRS Adjustments
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 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 (6/14/2001). The Department adjusted the Taxpayer's 2013 return based on the federal information available from the IRS as permitted by Virginia statute. As such, the 2013 assessment remains due and payable.
Interest and Penalty Waiver Request
The application of interest to tax underpayments is mandatory under Va. Code § 58.1-1812, and it cannot be waived unless the associated tax is adjusted. Interest is not assessed as a penalty, but represents a fee for the use of money that was properly due the Commonwealth. As such, the Department finds no basis for abating any portion of the assessed interest. No penalties were included with the assessment.
CONCLUSION
The amount of tax assessed was based on adjustments by the IRS, and the Department does not look behind such adjustments. In addition, the law requires the assessment of interest to underpayments of tax, and Department does not have discretion to abate interest. The assessment, therefore, is upheld. The Taxpayer indicates that he has established a payment plan, so no further action from the Taxpayer is required at this time other than to abide by the terms of the payment plan. If the IRS adjusts its audit findings for the 2013 taxable year, the Taxpayer will be permitted to file an amended return to correct his liability pursuant to Va. Code § 58.1311 and Va. Code § 58.1-1823 A(ii).
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/1243.M