Document Number
18-91
Tax Type
Individual Income Tax
Description
Assessment and Timeliness
Topic
Appeals
Date Issued
05-18-2018

 

May 18, 2018

 

 

Re:    § 58.1-1821 Application:  Individual Income Tax

 

Dear *****:

 

This will reply to your letter in which you seek a correction of the individual income tax assessments issued to ***** (the “Taxpayers”) for the taxable years ended December 31, 2014 and 2015.

 

FACTS

 

The Taxpayers were audited by the Department for the 2014 and 2015 taxable years.  The state and local income tax portion of their itemized deductions was reduced and withholding was adjusted to agree to the amounts reported on their federal Schedule A and W-2 forms, respectively. The adjustments resulted in assessments of additional Virginia income tax and interest.  The Taxpayers do not question the accuracy of the Department's adjustments, but they appeal the assessments on the basis that the Department failed to timely notify them of their computational errors.

 

DETERMINATION

 

Virginia's taxing system is based largely on the theory of self assessment. Taxpayers are given the responsibility to compute, file and pay their own income tax. Virginia has implemented a self assessment system based on the federal system because it is less intrusive upon the taxpayer, and less costly to the administration of the tax.  Virginia receives approximately 3.5 million individual income tax returns per year.  Only a small portion of the individual taxpayers can be audited or reviewed annually.  The Department has addressed this issue numerous times.  See for example Public Document (P.D.) 11-87 (6/2/2011), P.D. 13-29 (3/11/2013) and P.D. 14-32 (3/7/2014).

 

The Department has the authority to assess the additional tax plus any penalty and interest, as required by law, when it finds that any taxpayer “has failed to make a proper return or to pay in full any proper tax.”  See Virginia Code § 58.1-1812.  Further, Virginia Code § 58.1-312 allows the Department to assess omitted taxes within three years of the latter of the due date of the return or the actual date that the return was filed.  This is the same amount of time that taxpayers have to make corrections on their own returns.  There are exceptions that can extend the period beyond three years, but none apply in this case. The Department notified the Taxpayers that it was making adjustments to their 2014 and 2015 returns on August 11, 2017, well before the three-year period had expired for the taxable years at issue.  As such, the Department's adjustments were timely made in accordance with Virginia law.

 

The application of interest to tax underpayments is mandatory under Virginia Code § 58.1-1812 and it cannot be waived unless the associated tax is adjusted. Interest is not assessed as a penalty for noncompliance, but represents a fee for the use of money that was properly due the Commonwealth.  The Virginia statute is clear with respect to the assessment of interest.

 

In accordance with the authorities cited above, I find no basis to adjust or waive the assessments issued to the Taxpayers for the 2014 and 2015 taxable years.

 

The Code of Virginia sections and public documents 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/1463.B

 

Rulings of the Tax Commissioner

Last Updated 06/11/2018 09:26