May 25, 2021
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the assessment of individual income tax issued to ***** (the “Taxpayers”), for the taxable year ended December 31, 2017.
FACTS
The Taxpayers filed a 2016 Virginia individual income tax return in June 2020, reporting an overpayment of income tax and requesting that the overpayment be credited as an estimated payment for the following taxable year. The Department denied the credit because the return was filed beyond the refund period allowed by the statute of limitations. The denial of the overpayment credit caused a corresponding increase in the amount of tax due on their 2017 return. Accordingly, an assessment was issued for the 2017 taxable year for the underpayment of income tax. The Taxpayers paid the assessment and appeal, contending their medical problems prevented them from timely filing the returns.
DETERMINATION
Statute of Limitations for Refunds
Virginia Code § 58.1-499 A provides that in the case of any overpayment of any tax, whether by reason of excessive withholding, overestimating 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:
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.]
Although the Taxpayers have not requested an actual refund, but have requested that an overpayment of tax for the 2016 taxable year be applied against the income tax liability for the 2017 taxable year, the laws regarding refunds applies. As stated above, Virginia Code § 58.1-499 requires that an application for refund must be received within three years from the last day prescribed by law for the timely filing of the return. See Public Document (P.D.) 09-88 (5/28/2009). See also Joseph Richard Azar vs. Virginia Dep’t of Taxation, Circuit Court of Arlington County, Case No. 16-1910, the final order for which is reported as P.D. 17-140 (6/30/2017).
Individuals with Medical Conditions
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. Virginia Code § 58.1-341 F provides that an individual who is unable to make a return because of a disability has the responsibility of having such return filed by a fiduciary or duly authorized agent. Thus, Virginia law addresses the requirements of filing returns for taxpayers who have disabilities. While a severe illness or medical condition may be considered a disability for purposes of Virginia Code § 58.1-341 F, the statute does not provide for the suspension of the statute of limitations for an individual who is mentally or physically disabled. See P.D. 10-204 (9/2/2010).
Based on Virginia statutes, the due date for the Taxpayers’ 2016 individual income tax return was May 1, 2017. As such, the return was required to be filed by May 1, 2020, in order to receive a refund for the 2016 taxable year. The original 2016 return was not filed until June 13, 2020, after the statute of limitations had expired.
CONCLUSION
The provisions of Virginia Code § 58.1-499 D are clear and do not provide the Department with any discretion in enforcing the three-year limitations period to apply for a refund. Accordingly, the Department was correct in denying the overpayment credit claimed on the 2016 return and making the corresponding adjustment to the 2017 return. Therefore, the assessment is upheld. The balance of the assessment has been paid by the Taxpayers. Therefore, no further action is required.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3663.M