July 17, 2018
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond 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, 2014.
FACTS
The Taxpayer filed a 2014 Virginia resident individual income tax return reporting no income. The Taxpayer was audited by the Internal Revenue Service (IRS) for the 2014 taxable year, and the IRS notified the Department of adjustments it made to the Taxpayer’s federal income tax return. The Taxpayer failed to file an amended Virginia income tax return reflecting the IRS adjustments. The Department requested additional information from the Taxpayer to determine if his income was taxable in Virginia. When the Taxpayer did not respond with sufficient information within the allowed time, an assessment was issued. The Taxpayer appeals, contending he was not a Virginia resident and not subject to Virginia income tax.
DETERMINATION
Residency
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual’s expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, situs of real or tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person’s domicile. A person’s true intention must be determined with reference to all the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
In his appeal, the Taxpayer claims that he worked abroad during the tax year at issue and, therefore, was not a Virginia resident. Changing domicile, however, is a two-step process. First, a person must intend to permanently move away from one domicile. Second, the person must acquire a new domicile where he intends to remain permanently or indefinitely. See Robert H Talley v. Commonwealth, 127 Va. 516, 103 S.E. 612 (1920), State-Planters Bank v. Commonwealth of Virginia, 174 Va. 289, 6 S.E.2d 629 (1940), and Barbara B. Woods v. Commonwealth of Virginia, Circuit Court of Wise County and the City of Norton, Law No. 97-422 (3/20/2002).
By letter dated April 23, 2018, the Department requested information required to determine the Taxpayer’s domiciliary status. As of the date of this letter, no information has been received. Additionally, the Taxpayer has taken actions consistent with maintaining his domicile in Virginia, including filing Virginia resident individual income tax returns before during and after the year at issue. Further, the Department has repeatedly ruled that individuals generally lack the intent to abandon their Virginia domicile when they engage in temporary employment outside the Commonwealth. See P.D. 86-219 (11/3/1986), P.D. 94-353 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), P.D. 10-134 (7/12/2010), and P.D. 16-39 (3/31/2016).
Professional Tax Preparation
The Taxpayer claims that his employer’s human resources department and his personal tax preparer informed him that he would not be subject to Virginia income taxation while abroad. A taxpayer’s reliance on a tax professional to prepare income tax returns, while understandable, does not relieve the taxpayer of the responsibility for ensuring that the return is filed and the information reported on the return is accurate. Further, in a situation where a taxpayer relies on an accountant, lawyer, tax preparer or other tax professional and such tax professional provides inaccurate or erroneous advice that results in liability, the taxpayer has recourse against the tax professional. See Public Document (P.D.) 11-82 (5/31/2011), P.D. 12-93 (6/8/2012), and P.D. 16-169 (8/29/2016).
CONCLUSION
Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an “assessment of a tax by the Department shall be deemed prima facie correct.” As such, the burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia. Furthermore, Virginia Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is attributable to the taxpayers’ willful failure or refusal to provide the Department with necessary information as required by law.
The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. As such, the Department was correct in issuing the assessment. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable year at issue. Therefore, he should either provide additional information showing he was not a Virginia resident, or file a 2014 amended Virginia resident income tax return to reflect more accurately his Virginia tax liability.
The Taxpayer will be given one final opportunity to provide additional information or file a return. The return or additional information should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the information will be reviewed and the assessment will be adjusted, as appropriate. If no new information is received within the allotted time, the assessment will be considered correct and collection actions may result.
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 about this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1642.C