Tax Type
Individual Income Tax
Description
Waiver of Time Limitation
Topic
Collection of Tax
Date Issued
10-26-1998
October 26, 1998
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter of July 8, 1998, concerning the 1994 Virginia individual income tax assessment of your client, ***** (the ``Taxpayer'). I apologize for the delay in replying to your letter.
FACTS
In 1994, the Taxpayer was a domiciliary resident of Virginia, however, he moved to North Carolina on December 14, 1994. Although he worked in Virginia, his employer inadvertently withheld taxes for the entire year for North Carolina. He was not aware of this mistake, therefore, he filed a Virginia resident return and claimed the tax withheld. A refund was issued by the department. Subsequently, the department conducted an audit of his Virginia return, disallowed North Carolina withholding tax claimed, and issued an assessment for additional tax and interest. The statute of limitations for claiming a refund of withholding tax from North Carolina has expired. Because of this situation, the Taxpayer must pay tax to both Virginia and North Carolina. You are requesting that the Taxpayer's assessment be waived.
DETERMINATION
Employers are liable for withholding and paying taxes on the wages of their Virginia employees as provided in Code of Virginia Sec. 58.1-474 and 58.1-484 (copies enclosed). Code of Virginia Sec. 58.1-467, copy enclosed, also provides that when an employer fails to withhold tax, the department will not collect the tax from the employer if the tax has been paid by the employee. Additionally, even though the employer withholds taxes for the incorrect state, this error does not lessen the taxpayers' obligation to report and pay taxes to the correct state on income that is received. The Taxpayer, therefore, was responsible for paying Virginia income tax even though the employer improperly withheld tax for North Carolina.
As you have indicated, the Taxpayer moved his residency to North Carolina on December 14, 1994. His Virginia return, therefore, has been adjusted to a part-year basis. His Virginia taxable income now includes his income while a Virginia resident reduced by personal exemption prorated by his period of residency in Virginia and standard deduction apportioned based on his income while a Virginia resident. As a result, the assessment has been adjusted.
Regrettably, the department must deny the appeal and uphold the 1994 Virginia individual income tax assessment. The adjusted balance due, as shown on the enclosed schedule, should be paid within 30 days from the date of this letter to avoid the imposition of additional interest. The payment should be remitted to *****, Office of Tax Policy, Department of Taxation, Post Office Box1880, Richmond, Virginia 23218-1880. If there are further questions, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16744N
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter of July 8, 1998, concerning the 1994 Virginia individual income tax assessment of your client, ***** (the ``Taxpayer'). I apologize for the delay in replying to your letter.
FACTS
In 1994, the Taxpayer was a domiciliary resident of Virginia, however, he moved to North Carolina on December 14, 1994. Although he worked in Virginia, his employer inadvertently withheld taxes for the entire year for North Carolina. He was not aware of this mistake, therefore, he filed a Virginia resident return and claimed the tax withheld. A refund was issued by the department. Subsequently, the department conducted an audit of his Virginia return, disallowed North Carolina withholding tax claimed, and issued an assessment for additional tax and interest. The statute of limitations for claiming a refund of withholding tax from North Carolina has expired. Because of this situation, the Taxpayer must pay tax to both Virginia and North Carolina. You are requesting that the Taxpayer's assessment be waived.
DETERMINATION
Employers are liable for withholding and paying taxes on the wages of their Virginia employees as provided in Code of Virginia Sec. 58.1-474 and 58.1-484 (copies enclosed). Code of Virginia Sec. 58.1-467, copy enclosed, also provides that when an employer fails to withhold tax, the department will not collect the tax from the employer if the tax has been paid by the employee. Additionally, even though the employer withholds taxes for the incorrect state, this error does not lessen the taxpayers' obligation to report and pay taxes to the correct state on income that is received. The Taxpayer, therefore, was responsible for paying Virginia income tax even though the employer improperly withheld tax for North Carolina.
As you have indicated, the Taxpayer moved his residency to North Carolina on December 14, 1994. His Virginia return, therefore, has been adjusted to a part-year basis. His Virginia taxable income now includes his income while a Virginia resident reduced by personal exemption prorated by his period of residency in Virginia and standard deduction apportioned based on his income while a Virginia resident. As a result, the assessment has been adjusted.
Regrettably, the department must deny the appeal and uphold the 1994 Virginia individual income tax assessment. The adjusted balance due, as shown on the enclosed schedule, should be paid within 30 days from the date of this letter to avoid the imposition of additional interest. The payment should be remitted to *****, Office of Tax Policy, Department of Taxation, Post Office Box1880, Richmond, Virginia 23218-1880. If there are further questions, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16744N
Rulings of the Tax Commissioner