November 9, 2021
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, 2017.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2017 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return for that year. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. After reviewing the information provided, the Department determined that the Taxpayer was required to file a return and issued an assessment. The Taxpayer concedes that he was required to file a Virginia income tax return for 2017, but contends that the amount of the assessment exceeded the amount of his liability.
A review of the Taxpayer’s information indicates that the company, ***** (Company A), issued a W-2 reporting income earned by the Taxpayer under his social security number, but did not withhold any Virginia income tax.
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. In addition, under Virginia Code § 58.1-312 A 1, the Department may assess income tax at any time if no return is filed.
Under review by our audit staff, the Department determined that the information regarding the W-2 issued under the Taxpayer’s social security number by Company A was improper. The Department has removed this information and eliminated any impact on the Taxpayer’s account. Many different circumstances can cause this type of discrepancy such as keying errors by employers, employee inaccuracy and identity theft. The Federal Trade Commission provides general identity theft guidelines at their website: http://www.ftc.gov.
Accordingly, the assessment was adjusted to reflect the Taxpayer’s proper amount of FAGI, also taking into account the amount of Virginia income tax withheld by his employer, ***** (Company B). Because the amount of income tax withheld exceeded the Taxpayer’s liability, the assessment has been abated.
Because the amount of Virginia income tax that was withheld exceeded the Taxpayer’s liability, the Taxpayer would normally be eligible for a refund. Virginia Code § 58.1-499 A provides that in the case of any overpayment of any tax, whether by reason of excessive withholding, overestimated and overpaying estimated tax, or error on the part of the taxpayer, the Department shall order a refund of the overpayment. Virginia Code § 58.1-499 D specifies, however, in pertinent part that:
No refund under this section . . . shall be made . . . whether on discovery by the Department or on written application of the taxpayer, if such discovery is not made or such written application is not received within three years from the last day prescribed by law for the timely filing of the return … [Emphasis added.]
Virginia Code § 58.1-341 A requires that a taxpayer file an individual income tax return by May 1 of the year following the tax year for which the return is filed. Based on Virginia statutes, the due date for the Taxpayer’s 2017 individual income tax return was May 1, 2018. As such, a return was required to be filed by May 3, 2021 (May 1 was a Saturday), in order to receive a refund for the 2017 taxable year. Because the Taxpayer did not file a return before the statute of limitations expired, the refund cannot be issued.
The Code of Virginia sections cited is 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/3782.B