Tax Type
Individual Income Tax
Description
Spouse of nonresident military; Itemized deductions
Topic
Returns/Payments/Records
Date Issued
03-14-1985
March 14, 1985
Re: Virginia Code Section 58.1-1821 Application
Individual Income Tax / 1981 and 1983
Dear ****
This is in response to your letter of January 10, 1985 in which you set forth the grounds for your protest of the assessments for taxable years 1981 and 1983.
FACT
****** (hereinafter referred to as Husband) was a member of the armed forces present in Virginia in compliance with military orders and a domiciliary resident of California for taxable years 1981 and 1983. ***** (hereinafter referred to as Wife) was an actual resident of Virginia for taxable years 1981 and 1983. You filed a joint federal income tax return for the years involved.
A joint Virginia resident individual income tax return was filed for taxable year 1981. The department accepted and processed this return as the joint return of two full year Virginia residents, because this was the way that it was filed. For taxable year 1983, Wife filed a separate resident individual income tax return. Both returns contained errors that were corrected during their initial processing. These corrections by the department resulted in an increase is the 1981 refund of $**** and a decrease of the 1983 refund of $****. You failed to question the department concerning the adjustment made to the 1981 return; however, you did question the department about the adjustment made to the 1983 return.
In resolving the question concerning your 1983 return it was discovered by the department that the 1983 return, as well as the 1981 return, contained additional errors. Your 1981 tax liability was recomputed on a separate basis when it was discovered that Husband was a nonresident of Virginia for 1981. This resulted in an increased joint tax liability of $****. Wife=s 1983 tax liability was increased when it was discovered that even though her 1983 Virginia income tax return contained only her share of income, it contained the total amount of itemized deductions that had been claimed on your joint federal income tax return. The department prorated the itemized deductions claimed using the ratio of Wife's share of income to total income.
In your letter of January 10, 1985, you indicate that you do not object to filing separate returns for 1981 and paying additional tax due. You object to: (1) The assessment of interest on the additional tax due for 1981, (2) The manner in which the itemized deductions were allocated on the 1981 return, (3) The disallowance of the full amount of itemized deductions on Wife's 1983 return.
DETERMINATION
I will address your second two objections first, since the interest you seek relief from is assessed on additional tax that resulted from the department=s allocation of your joint federal itemized deductions.
Virginia Code § 58.1-326 provides that:
If husband or wife is a resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes on such single or separate forms as may be required by the Department, unless both elect to determine their joint Virginia taxable income as if both, were residents.
In the computation of separate taxable incomes married persons who filed a joint federal return and who do not elect to file a joint Virginia return must list only the amount of itemized deductions that would have been allowable to him/her if separate federal returns had been filed. It has been the long-standing policy of the department to allocate itemized deductions based upon the income attributable to each where the taxpayers are not able to provide separate accounting for these deductions. This policy was recently published as Virginia Tax Regulation § 630-2-236, which states is part:
In the case of a married couple, one of whom is a nonresident of Virginia filing, separately, each spouse must account separately for items of income deductions, and exemptions. Where such items cannot be accounted for separately, deductions and personal exemptions must be proportionally allocated between each spouse based upon the income attributable to each.
Based on the allocation of itemized deductions in the above manner, $**** of additional income tax is due for 1981 and $**** of additional income tax is due for 1983.
You also seek relief in your petition from the assessment of interest on the additional tax due for taxable year 1981. Virginia Code § 58.1-1812 requires the imposition of interest for the period between the due date and the date of full payment. This statutory requirement can only be waived in cases where the assessment is based upon a doubtful and disputed claim, or cases in which the liability is of doubtful collectibility. Since neither condition exists, there is no basis upon which to abate the interest assessed for taxable year 1981.
Unless you cam provide substantiation to support separate accounting of the itemized deductions for taxable years 1981 and 1983 within the next thirty (30) days we will presume that you concur with the department's aIIocation and will consider this matter closed.
Sincerely,
W. H. Forst
Tax Commissioner
Re: Virginia Code Section 58.1-1821 Application
Individual Income Tax / 1981 and 1983
Dear ****
This is in response to your letter of January 10, 1985 in which you set forth the grounds for your protest of the assessments for taxable years 1981 and 1983.
FACT
****** (hereinafter referred to as Husband) was a member of the armed forces present in Virginia in compliance with military orders and a domiciliary resident of California for taxable years 1981 and 1983. ***** (hereinafter referred to as Wife) was an actual resident of Virginia for taxable years 1981 and 1983. You filed a joint federal income tax return for the years involved.
A joint Virginia resident individual income tax return was filed for taxable year 1981. The department accepted and processed this return as the joint return of two full year Virginia residents, because this was the way that it was filed. For taxable year 1983, Wife filed a separate resident individual income tax return. Both returns contained errors that were corrected during their initial processing. These corrections by the department resulted in an increase is the 1981 refund of $**** and a decrease of the 1983 refund of $****. You failed to question the department concerning the adjustment made to the 1981 return; however, you did question the department about the adjustment made to the 1983 return.
In resolving the question concerning your 1983 return it was discovered by the department that the 1983 return, as well as the 1981 return, contained additional errors. Your 1981 tax liability was recomputed on a separate basis when it was discovered that Husband was a nonresident of Virginia for 1981. This resulted in an increased joint tax liability of $****. Wife=s 1983 tax liability was increased when it was discovered that even though her 1983 Virginia income tax return contained only her share of income, it contained the total amount of itemized deductions that had been claimed on your joint federal income tax return. The department prorated the itemized deductions claimed using the ratio of Wife's share of income to total income.
In your letter of January 10, 1985, you indicate that you do not object to filing separate returns for 1981 and paying additional tax due. You object to: (1) The assessment of interest on the additional tax due for 1981, (2) The manner in which the itemized deductions were allocated on the 1981 return, (3) The disallowance of the full amount of itemized deductions on Wife's 1983 return.
DETERMINATION
I will address your second two objections first, since the interest you seek relief from is assessed on additional tax that resulted from the department=s allocation of your joint federal itemized deductions.
Virginia Code § 58.1-326 provides that:
If husband or wife is a resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes on such single or separate forms as may be required by the Department, unless both elect to determine their joint Virginia taxable income as if both, were residents.
In the computation of separate taxable incomes married persons who filed a joint federal return and who do not elect to file a joint Virginia return must list only the amount of itemized deductions that would have been allowable to him/her if separate federal returns had been filed. It has been the long-standing policy of the department to allocate itemized deductions based upon the income attributable to each where the taxpayers are not able to provide separate accounting for these deductions. This policy was recently published as Virginia Tax Regulation § 630-2-236, which states is part:
In the case of a married couple, one of whom is a nonresident of Virginia filing, separately, each spouse must account separately for items of income deductions, and exemptions. Where such items cannot be accounted for separately, deductions and personal exemptions must be proportionally allocated between each spouse based upon the income attributable to each.
Based on the allocation of itemized deductions in the above manner, $**** of additional income tax is due for 1981 and $**** of additional income tax is due for 1983.
You also seek relief in your petition from the assessment of interest on the additional tax due for taxable year 1981. Virginia Code § 58.1-1812 requires the imposition of interest for the period between the due date and the date of full payment. This statutory requirement can only be waived in cases where the assessment is based upon a doubtful and disputed claim, or cases in which the liability is of doubtful collectibility. Since neither condition exists, there is no basis upon which to abate the interest assessed for taxable year 1981.
Unless you cam provide substantiation to support separate accounting of the itemized deductions for taxable years 1981 and 1983 within the next thirty (30) days we will presume that you concur with the department's aIIocation and will consider this matter closed.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner