Tax Type
Individual Income Tax
Description
Underpayment of estimated tax; Additions to tax
Topic
Penalties and Interest
Taxpayers' Remedies
Date Issued
02-25-1985
- February 25, 1985
RE: §58.1-1821 Application/Individual Income Tax
Dear *****
This will reply to your letter of November 29, 1984 in which you submit an application for relief of the addition to tax assessed to ***** for the underpayment of estimated tax for taxable year 1983.
FACTS
***** (hereinafter "Taxpayer"), a nonresident, derives Virginia source income from her involvement in a partnership with investments in this state. As a limited partner, the taxpayer exercises no management control over the partnership. The taxpayer filed a 1983 nonresident income tax return upon which tax was due. As the taxpayer did not have withholding taxes credited to her and did not make any 1983 estimated tax payments, an addition to tax for the underpayment of estimated tax was assessed. The taxpayer requests relief of such assessment contending that it is difficult to estimate the taxpayers annual Virginia liability as the partnership's income from Virginia sources is unpredictable and indeed varies greatly from year-to-year.
DETERMINATION
As of the date of the instant assessment, Section 58-151.23(a) of the Code of Virginia (recodified as Virginia Code Section 58.1-492.A effective January 1, 1985) provided for the assessment of an addition to tax "[i]n the case of any underpayment of estimated tax by an individual," unless such individual met one of the four exceptions found in Virginia Code Section 58-151.23(d) (now Virginia Code Section 58.1-492.D).
In this case, no Virginia tax was withheld on behalf of the taxpayer and no Virginia estimated tax was paid by the taxpayer. Inasmuch as a return was filed showing a tax liability and no taxes were paid by the taxpayer prior to the filing of that return, the addition to tax provided for in Virginia Code Section 58-151.23(a) became applicable to the taxpayer.
As it does not appear that any of the exceptions provided under Virginia Code Section 58-151.23(d) were met by the taxpayer, I find no statutory basis for the relief of the addition to tax assessed. Further, I find no merit to the assertion that estimated taxes were not paid because it was impossible to determine the Virginia liability of the taxpayer. While the taxpayer obviously was unable to predict her income from Virginia sources, it was only reasonable to presume that she would have at least some Virginia liability for taxable year 1983. Virginia Code Section 58-151.21(a) (now Virginia Code Section 58.1-49O.A) provides:-
Every resident and nonresident individual shall...make a declaration of his estimated tax for the taxable year, if his Virginia adjusted gross income, other than from wages on which tax is withheld...can reasonably be expected to exceed four hundred dollars plus the sum of the personal exemptions to which he is entitled.
Based upon the taxpayer's 1982 Virginia tax liability, it would have been more than reasonable to presume that a declaration of estimated tax should have been filed for taxable year 1983. While it may have been unforeseen that the taxpayer's 1983 Virginia tax liability would have increased over one thousand dollars from the amount owed for 1982, the taxpayer would only have needed to remit estimated tax payments equal to her 1982 tax liability in order to avoid an addition to tax for the underpayment of 1983 estimated tax based upon the exception found in Virginia Code Section 58-151.23(d)(1)(A) (now Virginia Code Section 58.1-492 C.l.a).
Based upon the foregoing, I must consider the assessment issued to the taxpayer to have been properly assessed by the department; therefore, relief is not available under Virginia Code Section 58.1-1821 (formerly Virginia Code Section 58-1118). However, Virginia Code Section 58.1-105 provides the authority for the acceptance of offers in compromise, provided that the tax liability to be compromised is of doubtful legality or doubtful collectibility. It has been established already that the assessment to the taxpayer was proper and I can find no evidence that the taxpayer is unable to pay the assessment.
Accordingly, I find no basis for relief under Virginia Code Section 58.1-105. Therefore, the assessment issued to the taxpayer remains due and payable.
Sincerely,
W. H. Forst
State Tax Commissioner -
Rulings of the Tax Commissioner