Tax Type
Individual Income Tax
Description
Fraudulent evasion of tax
Topic
Penalties and Interest
Date Issued
07-07-1995
July 7, 1995
Re: §58.1-1821 Application: Individual Income Tax
Dear**************
This will reply to your letter of September 6, 1994 in which you seek correction of your 1991 Virginia individual income tax assessment.
FACTS
You have resided in Virginia for a number of years and claim that you are a "Judicial Power State Citizen (sovereign) of the Union of States of the United States of America." As such, you claim to be a nonresident alien of the United States; and therefore, you contend that you are not subject to federal or Virginia taxation. Income received by you for services provided to employers was submitted to the Internal Revenue Service on Form 1099 MISC. The department obtained this information from the Internal Revenue Service and informed you accordingly. An assessment was issued when you did not file the appropriate returns. You protest the assessment by contending that, as a nonresident alien, you are not subject to the tax. You request abatement of the assessment.
There is no record that you filed Virginia income tax returns for the years prior to or subsequent to 1991.
DETERMINATION
The citizenship of an individual is typically not relevant in determining residency. Code of Virginia § 58.1-302, copy enclosed, specifically defines "resident" to include persons domiciled in Virginia as well as anyone physically present in Virginia. You admit to being physically present in Virginia for an extended period of time.
Code of Virginia §58.1 -341, copy enclosed, provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Code of Virginia §58.1-321, copy enclosed. When a resident does not file a Virginia return, Internal Revenue Code §6103 (d), copy enclosed, authorizes the department to obtain information from the Internal Revenue Service that will help in determining the resident's tax liability. Additionally, even if a resident is not required to file a federal return but has sufficient Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia income tax return pursuant to Code of Virginia §58.1-341.
You have not provided adequate documentation to indicate that you are not subject to tax as a Virginia resident. The department received information from the Internal Revenue Service indicating that you received income while residing in Virginia. By letter dated April 15, 1994, the department notified you of this fact and requested that you file a return. Pursuant to Code of Virginia §58.1-111, copy enclosed, the department has the authority to estimate tax liability when a person refuses to file a valid return. Furthermore, Code of Virginia §58.1-205, copy enclosed, provides that any assessment shall be deemed prima facie correct. Additionally, Code of Virginia §58.1-312, copy enclosed, provides that an assessment can be issued at any time if a return is not filed.
Although you claim to be a nonresident alien, the department's information and your documents clearly indicate that you reside in Virginia. As already mentioned, mere physical presence in Virginia for 183 days or more subjects a person (even a nonresident alien) to Virginia income tax as an "actual resident" unless exempted under a specific federal treaty.
Review of your material shows that the citizenship claims have no basis in fact or law and have no purpose other than tax evasion. Therefore, a person who refuses to file income tax returns and pay income tax based solely on such claims has intentionally understated his income tax liability with the intent to evade tax, and would be subject to a 100% fraud penalty pursuant to Code of Virginia §58.1-308, copy enclosed. Furthermore, one who files an application for correction pursuant to Code of Virginia §58.1-1821, copy enclosed, based solely on such claims has no purpose other than to hinder and delay collection of the proper tax liability. Consequently, collection activity need not be suspended while such applications for correction are being considered.
Therefore, you have not demonstrated that the assessment is incorrect. As you have refused to file your 1991 Virginia income tax return, the assessment was properly issued. The amount of********* including penalty of***** and updated interest of ******** is due within the next 30 days. In addition, within the next 60 days you must file Virginia income tax returns for all relevant years that you have not filed. Based on your continued residence in Virginia, these returns must be filed consistent with the laws of Virginia and the Internal Revenue Code. Continued refusal to file these returns will justify the 100% fraud penalty and other legal actions to collect the proper tax. Returns should be forwarded to ******** Office of Tax Policy, Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282-1880, who may be contacted at******************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8484N
Rulings of the Tax Commissioner