December 28, 2021
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayers”) for the taxable year ended December 31, 2018.
FACTS
The Taxpayers, a husband and wife, filed a joint part-year Virginia individual income tax return and reported that all of their income was attributable to their period of residency outside of Virginia. As a result, the Taxpayers were issued a refund of the Virginia tax that had been withheld from the wife’s wages. Under review, the Department determined that the wife’s wages should have been included in the Taxpayers’ Virginia taxable income (VTI) and issued an assessment. The Taxpayers appealed, contending that the assessment is incorrect because the wife had Virginia taxes withheld that should satisfy the amount owed.
DETERMINATION
Virginia Code § 58.1-303 provides that any person who becomes a resident of another state during a taxable year shall be taxable as a resident for only that portion of the taxable year during which that person was a resident of the Commonwealth. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 further explains that the VTI of a part-year resident shall be computed by determining income, deductions, subtractions, additions, and modifications attributable to the period of residence in Virginia. As such, any person who is a part-year resident of Virginia during a taxable year must apportion their income between their period of residence in and outside of Virginia on a Virginia Schedule of Income filed with their return.
Because the Taxpayers reported that none of their income was attributable to their period of Virginia residence, the Taxpayers received a refund of the amount of Virginia income tax withheld from the wife’s wages. The refund was issued in June 2019. The Taxpayers did not contest that the wife’s wages were taxable, only that she had enough income tax withheld to satisfy the assessment. As stated above, however, all the income tax that was withheld was refunded. Because the wife’s Virginia income tax withholdings were previously refunded, when the assessment was issued, the Taxpayers did not have any withholding to credit against the assessment.
Based in the facts in this case, the Department was correct in issuing the assessment and it remains due and payable. The Department will issue a revised bill, which will include accrued interest to date. The Taxpayers should remit payment within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.
The Code of Virginia sections and regulation cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/3831-C