What should I do if my federal tax return is examined and changed by the IRS?
If your federal income tax return is examined and changed by the Internal Revenue Service (IRS) and you owe additional tax, you must report these changes to Virginia Tax within one (1) year of the final federal determination. Checks should be made payable to the Virginia Department of Taxation. If the changes made by the IRS result in a refund due from Virginia, you must claim a refund within one (1) year of the date of the final federal determination or within three years (3) of the due date of the Virginia return. You can use a Virginia form, marked amended, to report changes to your filed Virginia income tax return and include a copy of the final federal determination along with all data and schedules on which the federal adjustment was based. You do not have to file an amended return if the changes do not affect your Virginia tax liability.
The IRS reports changes to federal returns to Virginia Tax. Even if you did not file a Virginia return, Virginia Tax may be notified of the federal change and contact you to inform you of receipt of this change and bill for the amount of tax owed the Commonwealth of Virginia, plus interest. If you failed to file an original Virginia return, you will be charged penalty for failure to file and pay. To avoid accrual of additional interest on the tax due, file your amended Virginia return as soon as you are notified of a change to your federal income tax return by the IRS.
What is the statute of limitations if the IRS makes a change to my federal return?
According to Va. Code § 58.1-312, a tax may be assessed at any time if the taxpayer fails to comply with § 58.1-311 in not reporting a change or correction increasing his federal taxable income as reported on his federal income tax return, or in not reporting a change or correction which is treated in the same manner as if it were a deficiency for federal income tax purposes or in not filing an amended return.
I have received a letter from Virginia stating that I do not have a return filed for a particular tax year, but I filed my tax return with another state for that year. What do I do?
Please indicate on the letter your state of residency for that tax year and submit a copy of our letter along with a copy of the other state's return and W-2s. This can be sent to the address at the bottom of the letter or faxed to 804.254.6104.
What if the IRS made a correction to their audit in my favor that is not reflected on the Notice of Proposed Assessment sent from Virginia?
Please submit the Final Determination letter you received from the IRS so the Virginia Proposed Assessment can be corrected. This can be sent to the address at the bottom of the letter or faxed to 804.254.6103.
What if I am currently disputing some or all of the adjustments made by the IRS, and at this time the information I have sent to them is under review?
Since the adjustments made to the Virginia return are based on adjustments made by the IRS to the federal return, we will not be able to make a correction to your Virginia return unless the IRS corrects your federal return. If you are currently disputing with the IRS, please call the tax examiner listed at the bottom of the Notice of Proposed Assessment.
If the Internal Revenue Service (IRS) revises the federal audit reported to Virginia Tax, does the IRS report the revision to Virginia Tax?
No, further changes to a federal audit are not reported to from the IRS. You have one year from the date of the IRS final determination to file an amended Virginia return or submit a copy of the IRS final determination notice for an adjustment of the Virginia audit. Please refer to Va. Code § 58.1-1823 Reassessment and refund upon the filing of amended return or the payment of an assessment.
How do I setup an installment payment plan for the amount due?
A bill titled Notice of Assessment has to be issued to setup a payment plan. Call 804.440.5100 to setup a payment plan if you have already received a bill.
If you have not received a bill, you will be able to setup a pay plan once a bill is issued. A bill will be issued and sent to you shortly after the reply by date on the initial letter.
What are my payment options if I have received a Notice of Proposed Assessment and would like to pay the amount due in full?
You will only be able to send a payment by mail at this time. The voucher included with our letter should be submitted with the full or an initial payment to the address listed on the voucher. Once a bill titled Notice of Assessment is issued, you will be able to pay using our telephone and online options or setup an installment payment plan.
How long do I have to pay the amount due on the Notice Proposed Assessment before additional interest accrues?
The amount due is good through the reply by date on the letter. Payments made by mail are credited as of the postmark date on the payment envelope.
I remember paying the amount owed previously. Why am I receiving a Notice of Proposed Assessment from Virginia?
More than likely you have paid the IRS federal taxes as a result of the adjustment made to your federal return. The letter you have received is for Virginia state taxes for adjustments made to your Virginia return that are based on federal changes. It is also possible that you paid Virginia for taxes owed from your original filing before adjustments were made or that you had adjustments from another tax year and paid the amount due for that year.
Can you waive the interest?
Interest is mandatory under Va. Code § 58.1-308.
What should I do if I am audited by IRS?
Under Va. Code § 58.1-311, you are required to amend the Virginia return. You should contact Virginia Tax if you have any questions as soon as possible.
What is the interest rate?
Under Va. Code § 58.1-15, the rate is 2 percent higher than the federal interest rate.
Why did it take so long for the state audit?
We make every effort to perform our audit as soon as possible but the taxpayer is made aware of an IRS audit before Virginia Tax is notified. Under Va. Code § 58.1-311, as a taxpayer, you are required to file an amended Virginia return immediately after the IRS audit.
What if I filed an amended Federal Income Tax Return (Form 1040X) with the IRS?
Please send a copy of the Form 1040X along with the IRS acceptance letter.
What do I do if I do not have a copy of the IRS final determination?
You need to contact IRS and request an IRS Record of Account to verify the changes. An IRS return transcript does not reflect the final determination.
What do I do if I agree with the letter and the proposed amount due?
It is not necessary to file an amended return. The adjustments have already been made and the payment should be mailed with the voucher to avoid further interest charges.
If I have additional information or documentation I would like you to consider, what do I do?
You may fax it to the number that is on the letter or mail it with a copy of our letter.
Helpful Hints for Audit-related questions
- If you need to discuss the letter we sent to you, please locate your tax records for that year before calling us. This will help us to guide you through the return and explain our changes.
- If you send the copy of our letter back to us with no supporting documentation, we cannot change the adjustment and a bill will be issued based on the original letter.
- When claiming an Out-of-State Tax Credit under the Border state rule, you are required to file an individual income tax return with Virginia and only one other state. (North Carolina, Maryland, West Virginia, the District of Columbia, or Kentucky).