August 11, 2020
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will reply to your letter concerning the Virginia individual income tax assessment issued to ***** (the “Taxpayers”) for the taxable year ended December 31, 2016.
FACTS
The Taxpayers were audited by the Internal Revenue Service (IRS) for the 2016 taxable year. The IRS adjusted the Taxpayers’ 2016 federal income tax return, resulting in a change to federal taxable income. The Taxpayers did not file an amended 2016 Virginia income tax return reflecting the IRS adjustment. As a result, the Department issued an assessment. The Taxpayers appeal the assessment.
DETERMINATION
Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income (VTI) with federal adjusted gross income (FAGI). Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia.
Virginia Code § 58.1-311 requires an 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 a taxpayer fails to file an amended return, Virginia Code § 58.1-312 A 3 permits the Department to assess the appropriate tax at any time.
In addition, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will assist in determining any additional tax liability. In this case, information obtained by the Department indicates the Taxpayers’ FAGI was increased.
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 (6/14/2011). The Department issued a letter dated September 5, 2019, notifying the Taxpayers of the change and providing further instructions to the Taxpayers. When no response was received, the Department adjusted the Taxpayers’ 2016 return based on the federal information available from the IRS.
In their appeal, the Taxpayers assert the matter was still under investigation. However, the Taxpayers have provided no support regarding that contention after the Department requested it by letter dated February 25, 2020, and email dated April 16, 2020. Therefore, I find no basis to revise the assessment.
I will, however, give the Taxpayers one last opportunity to provide adequate documentation with regard to the IRS investigation. The documentation should be submitted within 60 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****, Tax Analyst. Upon receipt, the documentation will be reviewed and assessments may be adjusted as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct and an updated bill with accrued interest will be issued. The bill should be paid within 30 days of the bill date to avoid the accrual of additional interest.
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/3270.A