Rulings of the Tax Commissioner

May 20, 2019

Re:  § 58.1-1821 Application:  Individual Income Tax

Dear Mr. *****:

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, 2017.

FACTS

The Taxpayer filed a 2017 Virginia part-year resident individual income tax return. The Taxpayer subsequently filed an amended return to make the following changes: (1) increase his federal adjusted gross income (FAGI); (2) report income attributable to his period of residency in ***** (State A); (3) decrease his standard deduction; and (4) decrease his personal exemption. The changes resulted in an increase in the amount of tax due, and an assessment was issued. The Taxpayer appealed, contending the Department erroneously taxed the State A income he earned prior to becoming a Virginia resident.

DETERMINATION

Virginia Code § 58.1-303 provides that a person who becomes a resident of Virginia is subject to taxation during the period in which he or she is a Virginia resident and is taxed as a resident only for the portion of the year that he or she resides in Virginia. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, a part-year resident may claim a portion of his Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, a part-year resident may claim a prorated Virginia standard deduction if he claims the standard deduction for federal income tax purposes. See Public Document (P.D.) 14-67 (5/20/2014).

On the Taxpayer’s original return, the amount of FAGI reported was already reduced by the Taxpayer’s income attributable to State A. The amended return merely reported the entire amount of FAGI, then separately accounted for the State A income earned outside his period of Virginia residency, as required by the part-year return form. In each case, the amount of the Taxpayer’s Virginia Adjusted Gross Income (VAGI) was the same. The amended return merely corrected how the FAGI and State A income were reported, compared to the original return which did not properly show the computation of VAGI. Therefore, the Taxpayer’s State A income was not subject to Virginia income tax. 

In addition, on the original return, the standard deduction and personal exemption had not been prorated as required under Virginia Code § 58.1-303. The amended return corrected these errors, which ultimately resulted in the additional tax due. As such, the assessment is upheld. Because the assessment has already been paid, no further action is required. A schedule is enclosed detailing the differences between the original and amended returns.

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/1831.M