Tax Type
Individual Income Tax
Description
Federal Adjusted Gross Income; Income Earned by Taxpayer's Children
Topic
Taxable Income
Date Issued
10-16-1992
October 16, 1992
Re: §58.1-1821 Application: Individual Income Tax
Dear******************
This will reply to your letter of November 24, 1991 in which you appeal the assessment of additional individual income taxes for the taxable year 1989.
FACTS
The tax assessment was based upon your failure to include the entire amount of your federal adjusted gross income on your Virginia return. You excluded from the amount of income you reported to the Commonwealth income earned by your children. You had made an election for federal purposed to include such income in your federal gross income amount. You claim that since you did not earn the income it should not be included in the amount of income you reported to the Commonwealth.
DETERMINATION
The starting point for calculating Virginia taxable income for individuals is federal adjusted gross income reported on the federal return. Va. Code §58.1-322 provides certain adjustments to an individual's federal adjusted gross income amount to determine the taxpayer's Virginia taxable income. Va. Code §58.1322 does not include a subtraction from federal adjusted gross income for income earned by a taxpayer's children which the taxpayer has elected to include in the amount of income reported to the federal government.
Despite the fact that you did not personally earn the income that was attributable to your children, since you included such income in the amount of income reported to the federal government you must also include such income in the income you report to the Commonwealth. Virginia does not provide a specific exclusion for individuals in your situation.
Although the 1991 General Assembly did consider legislation (HB 1556) to allow a subtraction on the parent's return for income of dependent children included in federal adjusted gross income, the bill was defeated. I enclose a copy of the impact statement which analyzed the potential tax results of HB 1556.
We shall, therefore, resume collection procedures in accordance with this determination. However, if you elect to file amended federal and Virginia returns you should send the amended returns directly to in************* our Technical Service Division.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/5821O
Rulings of the Tax Commissioner