Tax Type
Individual Income Tax
Description
Arbitrary assessments; Refusal to file return
Topic
Collection of Tax
Date Issued
12-30-1996
December 30, 1996
Re: §58.1-1821 Application: Individual Income Tax
Dear
This will reply to your letters concerning your 1991 and 1992 Virginia individual income tax assessments. I apologize for the delayed response.
FACTS
You did not file Virginia individual income tax returns for the taxable years 1991 and 1992. You have indicated that you are unable to find in Virginia law where a citizen of Virginia is required to file a Virginia individual income tax return. You state, further, that you did not receive federal income pursuant to § 61 of the Internal Revenue Code (IRC). You believe that income under this section only pertains to income earned in a foreign country. Because you had no foreign earned income, you believe that you are not subject to federal income tax. Consequently, you believe the contention and charges by the Internal Revenue Service (IRS) that you are subject to federal taxation are incorrect. Accordingly, you contend that you have no income, for Virginia purposes, and are not subject to Virginia taxation.
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 IRC 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). Section 61 (a)(1 ) of the IRC is included within Subtitle A, which pertains to income taxes. This section of the IRC clearly includes gross income received by persons who are residents of the United States. Section 61(b) of the IRC also cross references 71 through 90, which lists other types of gross income.
An individual's residency, as opposed to citizenship, determines if his income is subject to Virginia taxation. Code of Virginia § 58.1-302, copy enclosed, specifically defines "resident" to include persons domiciled in Virginia or a person who maintains a place of abode in Virginia for an aggregate of more than 183 days. Code of Virginia §58.1-320, copy enclosed, provides that a tax is annually imposed on the Virginia taxable income of a resident individual.
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, §6103 (d) of the IRC, copy enclosed, authorizes the department to obtain information from the IRS that will help in determining the resident's tax liability. The Agreement on Coordination of Tax Administration (the "Exchange Agreement"), copy enclosed, governs the exchange of tax information between the IRS and the department. For the taxable years 1991 and 1992, you were issued assessments by the IRS because you failed to file federal income tax returns. Your income was received while residing in Virginia; however, you failed to file Virginia returns. When the department received this information from the IRS, several letters were sent to you requesting the Virginia returns. You failed to furnish the requested returns; therefore, the department issued assessments of tax, penalty, and interest.
You requested a copy of the department's written request to the IRS for your federal income tax information. To implement the Exchange Agreement, the IRS is authorized to periodically transmit to the department reports indicating the federal audits or examinations that have been conducted. The information received from the IRS by the department on your account was obtained in this manner. A separate written request for such information signed by the Tax Commissioner is not required in these situations.
You have not provided sufficient documentation to verify that your income is not subject to Virginia taxation. 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 may be issued at any time if a taxpayer fails to file a Virginia return.
A review of the department's records and the documents you have provided clearly shows that you are a Virginia resident who received income that is subject to Virginia taxation. Your claims of not receiving income subject to Virginia tax have no basis in fact or Virginia law and have no purpose other than tax evasion. A person, therefore, 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.
Based on the information provided, the department has properly applied the provisions of Title 58.1 of the Code of Virginia to your case. There is, therefore, no basis to abate the assessments for the taxable years 1991 and 1992. A summary of these assessments is enclosed for your information. Interest has been updated. The balance due of these assessments must be paid within 30 days from the date of this letter. After this period, all actions to collect your assessments will resume.
A further review of our records indicates that you have failed to filed Virginia income tax returns for the taxable years 1988 and 1993 through 1995. As a result, within 60 days from the date of this letter, you must file Virginia income tax returns for all relevant years, before taxable year 1991 or after taxable year 1992 that have not been filed. Based on your continued residence in Virginia, 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 and other legal actions to collect the proper tax. Please forward your payment of the assessments and your income tax returns to ***************, Office of Tax Policy, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880, who may also be contacted at ****************
You have requested information concerning your appeal rights with the Commonwealth. Your case is currently being handled as an appeal pursuant to Code of Virginia §58.1-1821. If you are not satisfied with this determination, you may apply to the circuit court for relief pursuant to Code of Virginia §58.1 -1825, copy enclosed. The application, however, must be filed within three years from the date the assessments were made. Additionally, the assessments must be paid or the appropriate bond posted before the court application is deemed filed.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP11447N
Rulings of the Tax Commissioner