Tax Type
Individual Income Tax
Description
Filing an amended return; Failure to timely file
Topic
Returns and Payments
Date Issued
01-04-1995
January 4, 1995
Re: §58.1-1821 Application: Corporate Income Tax
Dear***********
This will reply to your letter in which you protest the assessment of corporate income tax for taxable years 1985 and 1986 issued against your client, *************(the "Taxpayer").
FACTS
In 1987 the Internal Revenue Service (the "Service") began an audit of the Taxpayer's 1985 and 1986 federal income tax returns. The audit of these taxable years was finalized in June 1991. The final report made certain adjustments which increased the Taxpayer's federal taxable income amount and its federal taxes due those years.
In July 1991, the Service began its audit of taxable years 1987 - 1989. This audit was not finalized until March 30,1992. This audit resulted in adjustments in favor of the Taxpayer for taxable years 1987 and 1989.
On June 30, 1993, the Taxpayer filed amended returns for taxable years 1985 1989 with the department claiming refunds for taxable years 1987 and 1989, and additional liability for taxable years 1985 and 1986. The department denied the refunds asserting that the Taxpayer did not file the amended returns within a timely manner. The department subsequently issued assessments for taxable years 1985 and 1986.
Claiming that the adjustments for taxable years 1985 - 1989 are interrelated, the Taxpayer asserts that the amended returns for all of the years should be allowed and the refund returns be netted against the amounts due.
DETERMINATION
The Code of Virginia §58.1-1823 provides taxpayers three years from the date a return is due or 90 days from the final determination of a federal tax change or correction, whichever is later, to file an amended return to request a refund. The Service adjusted the Taxpayer's taxable income amounts for taxable years 1987 and 1989. The final determination of the Taxpayer's adjusted tax liability for those years was made on March 30, 1992.
The 90 day period from the date of the Service's final determination concerning taxable years 1987' and 1989 expired June 30, 1992. For taxable year 1987, the Taxpayer's original return was due on October 15, 1988. Three years from that date was October 15, 1991. The amended return for taxable year 1987 was not filed until June 1993. Unfortunately, the amended return was not filed in a timely manner. Therefore, the department's disallowance of the claimed refund for taxable year 1987 was proper.
For taxable year 1989, the Taxpayer's original return was due on October 15, 1990. Three years from that date was October 15, 1993. Since the amended return for taxable year 1989 was filed in June 1993, prior to the expiration of the three-year period, the department's disallowance of the Taxpayer's 1989 amended return was improper. Therefore, the 1989 amended return shall be processed.
The Service concluded that for taxable years 1985 and 1986, the Taxpayer's federal taxable income was understated; consequently, it increased the amount of the Taxpayer's liability for those years. For the taxable years in which the Taxpayer owed additional tax to the department, pursuant to the Code of Virginia §§ 58.1-311 and 58.1312, the department may assess the Taxpayer with the additional taxes owed and accrued interest thereon at any time.
Based upon the Service's adjustment to the Taxpayer's federal taxable income for taxable years 1985 and 1986, the department assessed the Taxpayer for the additional Virginia income tax based on the adjustments. The department's assessments were proper.
The department will apply the refund due for taxable year 1989 to the outstanding assessments. The Taxpayer will shortly be receiving a revised bill.
It was noted that you requested a conference in the event that the department disallowed the amended returns. While the law is clear on this issue and since the department partially ruled in favor of the Taxpayer, a ruling has been issued without a conference. Should you desire to meet or if you have any additional information that would alter the conclusions reached herein, please contact ************to coordinate the transfer of this information and to schedule a meeting.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8460O
Rulings of the Tax Commissioner