Tax Type
Individual Income Tax
Description
Fraud penalty; Failure to file returns
Topic
Penalties and Interest
Date Issued
10-01-1984
October 1, 1984
Re: § 58-1118 Application/1972-1981 Income Taxes
Dear *****************
This responds to your application of April 4, 1983, and subsequent correspondence and discussion with the department, for correction of assessments of 1972 through 1981 individual income taxes, penalties, and interest.
FACTS
The taxpayers had not filed Virginia individual income tax returns for the years 1972 through 1981. For the years 1975 through 1981, the department assessed the taxpayers individual income taxes, penalties for fraud and for underpayment of estimated income taxes, and interest, based on an Internal Revenue Service audit dated November 15, 1982, as well as returns for 1979 through 1981 which the taxpayers jointly filed in September, 1982. For the years 1972 through 1974, there being no federal audits available, department made assessments based on the best information available, which was an average of the income and deductions for 1975 through 1981.
The taxes have been paid for all years involved except 1972 through 1974. The department has directed the taxpayers to file returns for those years; however, the taxpayers have refused to file, protesting that Virginia should assess taxes only on years for which audits were made by the Internal Revenue Service. The taxpayers also contested the assessment of 100 percent civil fraud penalty for all the years involved on the grounds that the Internal Revenue Service assessed civil fraud penalties only for the years 1975 through 1978. They assert that the Service was persuaded not to assess the fraud penalties for the years 1979 through 1981 because the taxpayers had been advised by counsel not to file federal or state returns until the federal criminal charges involving those years had been resolved.
DETERMINATION
The application for correction of the assessment of tax for the years 1972 through 1974 is denied. The taxpayers had not filed returns for those years after repeated directions to do so by this office. Application for correction of the assessment of fraud penalties and penalties for underpayment of estimated income taxes is also denied. There has been no information presented to show these assessments to be erroneous.
Payment of the outstanding assessments, including interest, is due immediately.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner