June 9, 2017
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you appeal the Department's denial of the application of an overpayment for individual income tax paid by ***** (the “Taxpayers”) on tax due for the taxable year ended December 31, 2007.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers may have income subject to Virginia income tax. Additional information was requested. When no response was received, the Department issued an assessment for the 2007 taxable year. The assessment was satisfied with a payment from a tax lien issued in February 2012.
The Taxpayers filed a 2007 Virginia nonresident individual income tax return in December 2014 and requested a refund. The Department denied the refund because the return was filed beyond the statute of limitations. The Taxpayers filed an appeal, contending the husband was a domiciliary resident of ***** (State A) stationed by the military in Virginia and only the wife's income should have been subject to Virginia income tax.
DETERMINATION
Virginia Filing Requirement
Virginia Code § 58.1-341 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 Va. Code § 58.1-321. When a resident does not file a proper Virginia return, Internal Revenue Code (IRC) § 6103(d) authorizes the Department to obtain information from the IRS that will help in determining the resident's tax liability. See Public Document (P.D.) 14-33 (3/7/2014) and P.D. 15-49 (4/3/2015).
Virginia Code § 58.1-326 provides, “If a husband or wife is a resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes on such single or separate forms as may be required by the Department, unless both elect to determine their joint Virginia taxable income as if both were residents. The Department's records show the wife filed Virginia income tax returns in 2003 through 2006 taxable years. Because the Taxpayers filed a joint federal return with a Virginia address, and made no return with the Department, an assessment was issued based on federal record.
Virginia Code § 58.1-104 generally requires the Department to make an assessment of underpaid tax within three years from the last day prescribed by law for the timely filing of the return. When a taxpayer fails to file a required Virginia return, however, Va. Code § 58.1-312 A 1 permits the Department to assess the appropriate tax at any time.
Generally, Va. Code § 58.1-1823 allows an individual to file an amended return within three years from the last day prescribed by law for the timely filing of the return. The due date for the 2007 Virginia income tax return was May 1, 2008. In order to have timely filed an amended return, the Taxpayers would have to have filed on or before May 1, 2011. In this case, the Taxpayers' 2011 amended return was filed in December 2014, well after the general statute of limitations had expired. Virginia Code § 58.1-1823, however, also includes a number of exceptions to the general rule when specific circumstances are present.
Under Va. Code § 58.1-1823 A (iv), an individual has two years from the payment of an assessment to file an amended return, provided that the amended return raises issues relating solely to such assessment and the refund does not exceed the amount of such payment. In this case, the Department assessed the Taxpayers' to reflect federal adjusted gross income (FAGI) reported to the Department by the IRS. The assessment was deemed to have been paid in February 2012 when the Taxpayers' bank account was drafted to satisfy a lien issued by the Department. In this case, the Taxpayers did not file their 2007 amended return until well after two year period in Va. Code § 58.1-1823 A (iv) had expired.
The statutes are clear and do not provide any discretion to allow for a refund beyond the statute of limitations. Accordingly, the Department has no choice but to deny the Taxpayers' request for an income tax refund for the 2007 taxable year.
The Code of Virginia sections and public documents 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 Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/885.D