February 29, 2016
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the "Taxpayer"), for the taxable year ended December 31, 2011.
FACTS
The Taxpayer and his wife filed a joint resident Virginia individual income tax return for the 2011 taxable year. The Department audited the return and assessed additional tax jointly against both the Taxpayer and his wife.
The Taxpayer and his wife subsequently divorced and entered into a property settlement and support agreement (the "Agreement") that addressed any potential tax liabilities. The Taxpayer appeals the assessment, contending that his former wife is liable for any additional Virginia income tax for the 2011 taxable in accordance with the Agreement.
DETERMINATION
Virginia Code § 58.1-341 B 1 provides that a husband and wife who file a joint tax return are liable jointly and individually for their tax liabilities. Title 23 of the Virginia Administrative Code (VAC) 10-110-240 C 3 b provides that joint and several liability means that each party to the return is individually liable for its contents and the entire tax liability arising therefrom and further entails "a joint or several obligation." Therefore, the tax liability may attach to one spouse individually or to both spouses jointly.
The Taxpayer contends that the Agreement assigns the 2011 Virginia income tax liability to the wife. In Virginia, property settlement agreements are contracts subject to the same rules of formation, validity, and interpretation as other contracts. See Smith v. Smith, 3 Va. App. 510, 351 S.E.2d 593 (1986). A contract cannot relieve a party from its responsibility under the laws of the United States and Virginia. This includes the duty to pay taxes.
In order to be bound by a contract, an entity must be a party to that contract. The only parties to this contract are the Taxpayer and his former spouse. Virginia's role in the making of this contract was merely to oversee the equitable distribution of the marital property. Because the Department is not a party to the contract, it is not bound by its provisions. The role of the Department in this situation is to properly administer the laws regarding taxation. The only possible party from whom the Taxpayer could seek relief from the tax would be the other party to the contract, his former spouse. See Public Document (P.D.) 99-103 (5/10/1999).
Accordingly, the assessment of additional tax is upheld and will remain outstanding until paid by either the Taxpayer or his former spouse. An updated bill will be issued to the Taxpayer. Payment of the outstanding balance as shown on the bill should be remitted within 30 days from the date of the bill to avoid the accrual of additional interest.
The Code of Virginia sections, regulation, and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6180904180.B