Tax Type
Individual Income Tax
Description
Refund; Statute of limitations; Adjustments to FAGI
Topic
Accounting Periods and Methods
Statute of Limitations
Date Issued
05-08-1995
May 8, 1995
Re: §58.1-1821 Application: Individual Income Tax
Dear*****************
This will reply to your letter of August 23,1994, in which you request a refund of Virginia individual income taxes resulting from adjustments made by the Internal Revenue Service (IRS) to the individual income tax returns of ************** (the "Taxpayers").
FACTS
The Taxpayers were audited by the IRS for the taxable years ended December 31,1986 through December 31,1989. The adjustments for 1986 and 1987 resulted in additional tax due. For 1988 and 1989 the adjustments were in favor of the Taxpayers, resulting in overassessments. The department was notified of the changes by the IRS in the spring of 1993, and assessed the Taxpayers for the deficiencies for 1986 and 1987. The department took no action on the refund years since the Taxpayers had not reported the IRS adjustments or filed amended returns with the department within the statute of limitations. The Taxpayers contest the department's procedure in handling multiyear audits which involve deficiencies and overassessments, and request that their refunds for 1988 and 1989 be issued as the department was notified of the overassessment by the IRS.
DETERMINATION
Whenever a taxpayer's federal taxable income is changed or corrected by the IRS, Code of Virginia §58.1-311 requires the taxpayer to file an amended return within 90 days. The Taxpayers did not file amended returns, or report the changes made by the IRS to the department. The Taxpayers have provided the department with a copy of Form 870-AD, which was signed by the Taxpayers' representative on June 11, 1992, and accepted by the IRS on August 25, 1992. In the absence of any other documentation, this constitutes a final determination of a change or correction of federal taxable income for Virginia tax purposes. Thus, amended Virginia returns for 1986 through l 989 should have filed by November 23, 1992 (90 days).
Because the required amended returns were not filed, Code of Virginia §58.1312 A. 3. allows the department to assess additional tax at anytime. In the case of refunds, however, Code of Virginia § 58.1 -1823 provides that a taxpayer has from the later of three years from the date a return is due, or 90 days from the final determination of a federal change or correction, to file an amended return to request a refund. The 90 day period from the date of the IRS final determination concerning the taxable years ended December 31, 1988 and 1989 expired November 23, 1992. For the taxable year ended December 31, 1988, the Taxpayers' original return was due on May 1,1989. Three years from that date was May 1,1992, thus, the statute of limitations within which a refund could have been issued expired on November 23, 1992. Your request for a refund with respect to the 1988 taxable year must therefore be denied.
For the taxable year ended December 31,1989, the Taxpayers' original return was due October 30, 1990. Three years from this date was October 30, 1993. It is noted that you sent a previous letter to the Tax Commissioner about this matter prior to the expiration of the statute on October 30, 1993. Therefore the department will honor your refund claim for the 1989 taxable year.
Your refund for the 1989 taxable year will be processed promptly and you will receive a refund in due course. Please contact**************should you have additional information or question regarding this matter.
-
-
-
-
-
-
-
-
-
-
-
- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
-
-
-
-
-
-
-
-
-
-
Rulings of the Tax Commissioner