October 23, 2024
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, 2020.
FACTS
The Internal Revenue Service (IRS) notified the Department that it adjusted the Taxpayer’s 2020 federal adjusted gross income (FAGI). 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 Taxpayer filed an application for correction, contending the IRS adjustment was incorrect.
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. For individual income tax purposes, Virginia conforms to federal law, in that it starts the computation of Virginia taxable income 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 taxpayers to report a change or correction in their federal taxable income within one year of the final determination of such change or correction by filing an amended return with the Department. If the 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, Internal Revenue Code (IRC) § 6103(d) authorizes the Department to obtain information from the IRS that will assist in determining any additional tax liability. Information obtained by the Department indicated that the IRS adjusted the Taxpayer’s FAGI to be greater than the FAGI the Taxpayer reported on her 2020 Virginia income tax return.
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). In this case, the Department adjusted the Taxpayer’s 2020 Virginia return based on the federal information available from the IRS. It appears that the IRS’s adjustment was attributable to additional income reported by a company that operates a business technology platform for processing payments.
The Taxpayer asserts that the IRS’s adjustment is incorrect because the income was attributable to non-taxable payments made by friends and family through a payment app. The Taxpayer, however, has not provided any objective evidence of these assertions or legal arguments as to why such payments would not be taxable. Regardless, the IRS has not re-adjusted the Taxpayer’s FAGI, nor is there any indication the Taxpayer has appealed the matter to the IRS.
Under these circumstances, the Department finds no basis to abate the assessment. The Taxpayer will receive an updated bill that will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collection actions. If the IRS adjusts its audit findings for the 2020 taxable year, the Taxpayer will be permitted to file an amended Virginia return to correct the liability pursuant to Virginia Code § 58.1-311 and Virginia Code § 58.1-1823.
The Code of Virginia sections cited are available online at law.lis.virginia.gov. The public document cited is available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this decision, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4948.Q