July 20, 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 assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 2016 and 2017.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating the Taxpayer failed to include all his income in federal adjusted gross income (FAGI) on his federal individual income tax returns for the 2016 and 2017 taxable years. Because the Taxpayer had not filed amended Virginia income tax returns to report the federal changes, assessments were issued for additional tax due. The Taxpayer appealed, contending that the Department did not explain what income he failed to report and that in any event, he had no unreported income.
DETERMINATION
2016 Taxable Year
Virginia Code § 58.1-1821 states, “Any person assessed with any tax administered by the Department of Taxation may, within 90 days from the date of such assessment, apply for relief to the Tax Commissioner. Such application shall be in the form prescribed by the Department and shall fully set forth the grounds upon which the taxpayer relies and all facts relevant to the taxpayer’s contention.” Pursuant to Virginia Code § 58.1-1821 and Title 23 of the Virginia Administrative Code (VAC) 10-20-165, a complete appeal must be filed with the Department within 90 days from the date of assessment. In addition, Virginia Code § 58.1-1820 provides that assessments made by the Department are deemed to be made when a written notice of assessment is mailed to a taxpayer at his last known address.
The assessment for the 2016 taxable year was issued on October 3, 2019. The Taxpayer filed an appeal for the taxable years at issue with the Department by letter dated October 27, 2020, well after the 90 day period had expired.
2017 Taxable Year
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 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 IRS notified the Taxpayer of the increase to his FAGI for the 2017 taxable year on July 29, 2019. When the Department did not receive an amended return to report the change within a year, an assessment was issued.
CONCLUSION
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). A schedule showing the Taxpayer’s FAGI as reported by the IRS has been attached.
The Department issued letters dated August 20, 2019, for the 2016 taxable year and August 17, 2020 (copies enclosed), notifying the Taxpayer of the changes and providing further instructions. When no response was received, the Department adjusted the Taxpayer’s 2016 and 2017 returns based on the federal information available from the IRS and issued assessments. In the case of the 2016 assessment, the Taxpayer filed his appeal well after the expiration of the 90 day deadline to file an appeal. Even if the appeal had been timely filed as to that year, however, I find no basis to revise that assessment, nor do I find any basis to revise the assessment for the 2017 taxable year.
The Taxpayer will receive updated bills with accrued interest to date. The bills should be paid within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.
The Code of Virginia sections, regulation 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/3609.B