July 29, 2019
Re: § 58.1-1821 Application: Withholding Tax
Dear *****:
This will respond to your letter in which you seek correction of the withholding tax assessments issued to ***** (the “Taxpayer”) for the August 2017 through September 2018 taxable periods.
FACTS
The Taxpayer did not file withholding tax returns for the periods at issue. Under review, the Department requested that the Taxpayer submit the required withholding tax returns and any applicable payments. When no response was received, the Department issued assessments based on the best information available. The Taxpayer appeals, contending the business closed in December 2017, and the assessments are overstated.
DETERMINATION
Business Closing
The Taxpayer argues the assessments for the 2018 taxable periods were issued for periods after it ceased business operations. When a business closes, it is incumbent upon the responsible parties of such entity to notify the Department of its change in taxable status. Without such notification, a significant period of time may elapse before the Department becomes aware of the change in the taxpayer’s filing requirements.
Generally, a simple notification is all that is required. When an entity fails to timely notify the Department, however, additional documentation may be required. Documentation may include bank account closing statements, cessation of lease agreements, verification of a successor entity, or a cessation date from the State Corporation Commission (SCC). In this case, the Taxpayer has provided no evidence to show it was no longer in business.
Employer Withholding
Every employer who pays wages to employees must withhold Virginia income tax from such employee’s wages unless a withholding exemption certificate, in such form and containing such other information as the Department may prescribe, is furnished by the employee to the employer. See Virginia Code § 58.1-461. Additionally, every employer required to deduct and withhold from an employee’s wages must file a return and pay over to the Department the amount required to be withheld. See Virginia Code § 58.1-472.
The Taxpayer asserts that the assessments at issue are incorrect based on the withholding tables, number of employees, and gross pay. Because the Taxpayer failed to respond to the Department’s request for the required returns and applicable payments, the Department was authorized to reasonably approximate the Taxpayer’s withholding liability. See Virginia Code § 58.1-111.
CONCLUSION
If the Taxpayer continues to believe there are errors in the assessments, the Taxpayer should file the required withholding tax returns. The Taxpayer is hereby requested to provide documentation certifying when it ceased operations. In addition, the returns for the August 2017 through December 2017 taxable periods, as well as an annual withholding reconciliation form (VA-16) with forms W-2, should be filed within 30 days of the date of this letter. Upon receipt, the documents will be reviewed, and the assessments will be adjusted as warranted. If the forms are not submitted in the time allotted, the assessments will be deemed correct and collection action may resume.
The Code of Virginia sections 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/1988C