Tax Type
Individual Income Tax
Description
Married filing separate returns, refund of estimated tax paid
Topic
Payment and Refund
Date Issued
06-11-1999
June 11, 1999
Re: § 58.1-1821 Application: Individual Income Taxation
Dear************
This will reply to your letter of in which you contest the assessment of additional income tax and interest on ***** (the "Taxpayer') for the 1996 taxable year. I apologize for the delay in replying.
FACTS
The Taxpayer and his wife ("Spouse') filed separately on a combined return for the 1995 tax year. The overpayment on the 1995 return was credited toward 1996 income taxes. The Taxpayer and Spouse jointly made estimated tax payments for the 1996 tax year. In early October 1997, the Spouse filed a separate income tax return. She claimed the full amount of the credit from the 1995 return and 1996 estimated income tax payments. A refund was issued to her based on this claim.
The Taxpayer subsequently filed a separate 1996 income tax return. Because all estimated tax payments were credited to the Spouse, the Taxpayer was assessed additional tax and interest. The Taxpayer contests the application of the entire 1996 tax payments to the Spouse. He contends that the payments should have been applied proportionally between the Taxpayer and Spouse according to their respective tax liabilities. The Taxpayer and Spouse do not have an agreement as to the allocation of the 1996 income tax overpayment.
DETERMINATION
Code of Virginia § 58.1-341 (D) provides for the following if a husband and wife file their income taxes separately on a combined return:
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- 1. If the sum of the payments by either spouse, including withheld and estimated taxes, exceeds the amount of the tax for which such spouse is separately liable, the excess may be applied by the department to the credit of the other spouse if the sum of the other payments by such other spouse, including withheld and estimated taxes, is less than the amount of the tax for which such other spouse is separately liable.
2. If the sum of the payments made by both spouses with respect to the taxes for which they are separately liable, including withheld and estimated taxes, exceeds the total of the taxes due, refund of the excess may be made payable to both spouses. (Emphasis added.)
[The above provisions] shall not apply if the return of either spouse includes a demand that any overpayment made by him or her shall be applied only on account of his or her separate liability.
- 1. If the sum of the payments by either spouse, including withheld and estimated taxes, exceeds the amount of the tax for which such spouse is separately liable, the excess may be applied by the department to the credit of the other spouse if the sum of the other payments by such other spouse, including withheld and estimated taxes, is less than the amount of the tax for which such other spouse is separately liable.
While the Taxpayer and Spouse filed separate 1996 returns, their credit from their 1995 return and their 1996 estimated payments were made jointly. The Taxpayer's return did not include a demand that the overpayments be applied to their respective liabilities, nor has the Taxpayer presented any evidence of an agreement to allocate 1996 overpayments. In absence of such agreement or demand, the department has properly refunded the 1996 overpayment to a proper party.
The Taxpayer contends that the Internal Revenue Service (IRS) in Treas. Reg. 1.6015(b)-1(b) and the federal courts in Hathaway v. U.S.. 93-1 USTC Para. 50285 (W.D. Wash. 1993) have held that overpayments of income tax must be allocated based on the respective tax liabilities of the parties.
Virginia's conformity to federal law is set forth in Code of Virginia § 58.1-301, which provides the terms used in the Virginia income tax statutes will have the same meaning as used in the Internal Revenue Code (IRC). As such, Virginia's conformity to federal law is limited to the actual use of a specific term in a Virginia statute. Conformity does not extend to terms, concepts, or laws not specifically provided in the Code of Virginia. Thus, Virginia tax law does not conform with federal tax law unless the law is expressly stated in the Code of Virginia. Virginia law does not require the allocation of tax refunds based on the respective liabilities of a husband and wife.
While I sympathize with your situation, the department's assessment of additional tax and interest against the Taxpayer for 1996 must be upheld. A schedule showing your tax liability and updated interest has been enclosed. If you have any questions about this determination, you may contact ***** at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13281B
Rulings of the Tax Commissioner