June 9, 2017
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek refunds of the overpayments of individual income tax paid by ***** (the “Taxpayers”) for the taxable years ended December 31, 2011, and 2012.
FACTS
The Taxpayers, a husband and wife, filed their 2011 through 2013 Virginia individual income tax returns in July 2016, reporting overpayments of income tax and requesting refunds. The Department issued the 2013 refund but denied the refunds for 2011 and 2012 because the returns were filed beyond the refund period allowed by the statute of limitations. The Taxpayers appeal the denial, contending the limitations period should be extended because the husband worked in a combat zone as an employee of a military contractor from March 2012 to November 2014.
DETERMINATION
Virginia Code § 58.1-499 A provides that in the case of any overpayment of any tax, whether by reason of excessive withholding, overestimating and overpaying estimated tax, or error on the part of the taxpayer, the Department shall order a refund of the overpayment. Virginia Code § 58.1-499 D specifies, however, in pertinent part that:
No refund under this section . . . shall be made . . . whether on discovery by the Department or on written application of the taxpayer, if such discovery is not made or such written application is not received within three years from the last day prescribed by law for the timely filing of the return . . . [Emphasis added.]
Virginia Code § 58.1-341 A requires that a taxpayer file an individual income tax return by May 1 of the year following the tax year for which the return is filed. Based on Virginia statutes, the due dates for the Taxpayers' 2011 and 2012 individual income tax returns were May 1, 2012, and May 1, 2013, respectively. As such, the returns were required to be filed by May 1, 2015, and May 2, 2016, respectively, in order to receive the refunds (May 1, 2016, was on a Sunday). The original 2011 and 2012 Virginia income tax returns were not filed until July 2016, after the statute of limitations had expired for each year. See, e.g., Public Document (P.D.) 12-126 (7/31/2012) and P.D. 15-29 (2/24/2015).
In Virginia Tax Bulletin (VTB) 05-5 (4/26/2005), however, the Department announced that Virginia would provide filing extensions and other tax benefits to members of the Armed Forces serving in combat zones. Such taxpayers would be permitted to file their individual income tax returns by the extended due date granted by the IRS plus fifteen days or one year from the original due date of the return, whichever was later. VTB 05-5, however, did not expressly include employees of military contractors working in combat zones. Under Internal Revenue Code (IRC) § 7508, both individuals in the Armed Forces and individuals “serving in support of such Armed Forces” in a combat zone are granted the federal filing extension, which is generally equal to the period of service in the combat zone plus 180 days. Under Va. Code § 58.1-344 G 2, for any individual who qualifies for postponement under IRC § 7508, the deadline is the period of federal postponement plus 15 days, if that date is greater than one year from the original due date of the return.
The Taxpayers have provided documentation from the IRS indicating that they were entitled to the combat zone extension for the husband's period of employment between March 5, 2012, to November 30, 2014. One hundred eighty days from November 30, 2014, was May 29, 2015. Fifteen additional days was June 13, 2015. Therefore, the Taxpayers' filing deadline for both their 2011 and 2012 Virginia income tax returns was June 15, 2015 (June 13, 2015, was a Saturday). Under Va. Code § 58.1-499 D, the Taxpayers had three years from that due date to claim their refunds. They filed their 2011 and 2012 returns on July 29, 2016, well within the three year limitations period.
Accordingly, the returns will be processed and the refunds will be issued shortly with applicable interest. The Taxpayers should be aware, however, that their 2011 and 2012 returns remain subject to review within the applicable limitations period for assessment.
The Code of Virginia sections, public documents and tax bulletin 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/1145.M