Tax Type
Individual Income Tax
Description
100% fraud penalty
Topic
Penalties and Interest
Date Issued
12-20-1996
December 20, 1996
Re: §58.1-1821 Application: Individual Income Tax
Dear****************
This will reply to your letter concerning your 1990 and 1991 Virginia individual income tax assessments. I apologize for the delayed response.
FACTS
For the taxable year 1990 and 1991, the department's records indicate that you did not file a Virginia individual income tax return. The Internal Revenue Service (IRS) informed the department you were subject to taxation on certain types of income. A letter was sent to you requesting that these returns be filed. As Virginia returns were never filed, assessments were issued for tax, penalties, and interest. A further review of our records indicates that you have not filed Virginia individual income tax returns for the taxable years 1992 through 1995. You have refused to pay the assessments and contend that the department appears to have no basis for making these assessments.
DETERMINATION
Code of Virginia § 58.1-301, copy enclosed, provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code unless a different meaning is clearly required. Virginia "conforms" to federal law because it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). To the extent that income is included in FAGI, it is also subject to taxation by Virginia.
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. 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. 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 taxpayer fails to amend the Virginia return when a federal change or correction increases federal taxable income or if a Virginia return is not filed.
Code of Virginia §58.1-1820, copy enclosed, provides that an assessment is deemed made when it is mailed to the taxpayer at his last known address. The 1990 and 1991 assessments were mailed to you at the address provided by the Internal Revenue Service. Additionally, you have used this address in previous correspondence with the department concerning these assessments.
In response to your letter October 16, 1994, copy enclosed, the department sent a letter to you on January 26, 1995, copy enclosed. This letter showed the types of income that the Internal Revenue Service (IRS) indicated you received for the taxable year 1990 and 1991. This income was used to compute your Virginia tax liability after allowing personal exemptions and the standard deduction, and assessments were issued. The department has no record that you have made any payments toward these assessments.
You have provided no documentation to substantiate that the assessments for the taxable years 1990 and 1991 are incorrect, and you have not filed Virginia returns for these years. There is, therefore, no basis to abate these assessments. A summary of the outstanding assessments is enclosed, and the interest has been updated. The total of************should be remitted within 30 days from the date of this letter. If payment is not received, collection activity will be resumed. In the event that you file these Virginia returns, the assessments may be adjusted.
In addition, within 60 days from the date of this letter, you must file Virginia income tax returns for all relevant years, before taxable year 1990 and after taxable year 1991, that have not been filed. These returns must be filed consistent with the
Code of Virginia and the Internal Revenue Code. Continued refusal to file any returns referenced in this letter will justify the 100% fraud penalty, pursuant to Code of Virginia §58.1-308, copy enclosed, and other legal actions to collect the proper tax.
Payments of your assessments and income tax returns should be forwarded to *************Office of Tax Policy, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880, who may be contacted at**************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP11234N
Rulings of the Tax Commissioner