Tax Type
Individual Income Tax
Description
Statute of limitations for refund
Topic
Payment and Refund
Statute of Limitations
Taxpayers
Date Issued
11-18-1991
November 18, 1991
Re: §58.1 - 1821 Application: Individual Income Tax
Dear******************
This will reply to your letter dated February 27, 1991, in which you contest the individual income tax assessment by the department against your clients, *************(the "Taxpayers" ) for taxable year 1984, and request a refund of amounts paid pursuant to the contested assessment.
FACTS
In 1987, the Taxpayers' 1984 federal income tax return was adjusted by the Internal Revenue Service (IRS) to include certain gross proceeds from sales of securities that were not reported on the Taxpayers' original return, as filed, together with unreported benefits from the Social Security Administration and/or Railroad Retirement Board.
As a result of the IRS adjustments, the department made an assessment for additional taxes for taxable year 1984 on August 29, 1988. The assessment was not paid by the Taxpayers; therefore, the department withheld a portion of the overpayment indicated on the Taxpayers' 1989 income tax return to offset the assessment.
Later, the Taxpayers filed with the IRS an amended return for 1984, offsetting the gross proceeds from the securities sales with stock basis amounts, resulting in a claim for a federal income tax refund. The refund claim was denied by the IRS, by letter dated February 19, 1991, because the claim was not filed within the statutory period allowed for filing refund claims.
Nonetheless, the Taxpayers believe that their Virginia refund claim for taxable year 1984 which was filed on February 27, 1991, should be processed by the Department of Taxation.
DETERMINATION
Generally, Virginia income tax statutes conform with the federal Internal Revenue Code. Accordingly, Virginia law provides that the starting point for the state income tax is federal adjusted gross income with certain modifications specified in Va. Code §58.1-322. Thus, when there is a change in a taxpayers federal adjusted gross income, the taxpayer's Virginia taxable income is adjusted accordingly, as was the case with the Taxpayers' income tax return for 1984. On August 29, 1988. the department adjusted the Taxpayers' Virginia income tax return for taxable year 198 to reflect the changes made by the Internal Revenue Service.
Your amended federal income tax return for taxable year 1984, lowering your federal adjusted gross income. was rejected by the Internal Revenue Service by letter dated February 19. 1991. Therefore, your federal adjusted gross income for both federal and Virginia purposes remains unchanged since the 1987 adjustment. Absent an additional adjustment by the IRS reporting a lower federal adjusted gross income, the department has no authority to accept the Taxpayers' amended return.
Therefore, I find no basis for granting your claim.
Sincerely.
W. H. Forst
Tax Commissioner
TPD/5137M
Rulings of the Tax Commissioner