July 13, 2021
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 “Taxpayers”) for the taxable year ended December 31, 2012.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating the IRS adjusted the Taxpayers’ itemized deductions for the 2012 taxable year. Because the Department had no record of having received an amended Virginia income tax return to report the federal change, an assessment was issued for additional tax due. The Taxpayers filed an appeal, contending that they filed an amended return and the Department should have notified them of any discrepancy within one year of the return’s due date.
DETERMINATION
Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income (VTI) with FAGI. Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia.
Virginia Code § 58.1-311 requires an individual to report a change or correction in federal taxable income within one year of the final determination of such change or correction by filing an amended return with the Department. If a taxpayer fails to file an amended return, Virginia Code § 58.1-312 A 3 permits the Department to assess the appropriate tax at any time.
In addition, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will assist in determining any additional tax liability. In this case, information obtained by the Department indicates the IRS adjusted the Taxpayers’ itemized deductions. Where the IRS has audited the federal taxable income of a taxpayer, the Department does not look behind the IRS’s final determination. See Public Document (P.D.) 11-107 (6/14/2011).
The Taxpayers contend that they filed an amended 2012 Virginia return reporting the additional income. The Department, however, has no record of receiving an amended return or of any additional payment of tax for the 2012 taxable year.
The Taxpayers assert that the Department should have notified them about the discrepancy involving the 2012 taxable year within one year of the due date of the return. As stated above, however, there is no limitations period for assessing additional individual income tax when there is an increase in liability due to a change in federal taxable income and a taxpayer fails to amend their Virginia return accordingly.
Regardless, the Department issued a letter dated October 14, 2020, notifying the Taxpayers of the change and providing further instructions to the Taxpayers. Because the Taxpayers were unable to provide proof that they filed an amended 2012 Virginia return and paid the additional liability due, the Department adjusted the Taxpayers’ return based on the federal information available from the IRS.
Accordingly, I find no basis to revise the assessment. The Taxpayers will receive an updated bill with accrued interest to date. The bill should be paid within 30 days of the bill date to avoid the accrual of additional interest.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website.
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/3689.B