Rulings of the Tax Commissioner

November 14, 2024

Re: § 58.1-1821 Application: Individual Income Tax
    
Dear *****:

This will respond to your letter in which you seek correction of the individual income tax assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 2018, through 2020. 

FACTS

The Internal Revenue Service (IRS) notified the Department that it adjusted the Taxpayer’s 2018 and 2019 federal income tax returns. Because the Department had no record of having received amended Virginia income tax returns to report the federal changes, assessments were issued for additional tax due. The Department also disallowed the age deduction and overpayment credit claimed from the 2017 taxable year on the 2018 Virginia income tax return. In addition, the Department adjusted the Taxpayer’s 2019 Virginia income tax return to remove the overpayment credit claimed from the 2018 taxable year. Further, the Department disallowed the age deduction, estimated payments, and overpayment credit claimed from the 2019 taxable year on the Taxpayer’s 2020 Virginia income tax return. The Taxpayer filed an application for correction, requesting that the Department correct the assessments to reflect the returns she included with her application. 

DETERMINATION

Internal Revenue Service Adjustments

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 federal adjusted gross income (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 made to their federal taxable income within one year of the final determination of any 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, the information obtained by the Department indicated that the Taxpayer’s FAGI and self-employment income were increased as a result of an IRS examination performed in 2022. 

The Taxpayer requests that the Department disregard the IRS adjustments and accept the returns included with her application for correction. The IRS, however, has not made any changes to its adjustments. 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). 

Other Adjustments

Under review, the Department removed the overpayment credits claimed on the Taxpayer’s 2018, 2019, and 2020 Virginia income tax returns because there were no available overpayment credits from the 2017, 2018, or 2019 taxable years, respectively. The Department also removed the estimated payments reported on the Taxpayer’s 2020 Virginia income tax return because the Department had no record of receiving any estimated payments in 2020. The Taxpayer has not provided any evidence to prove that these adjustments were incorrect.

In addition, the Department adjusted the Taxpayer’s 2018 and 2020 returns to disallow the claimed age deduction. Virginia Code § 58.1-322.03 14 provides a deduction for certain qualifying individuals age 66 and over. The Taxpayer was not age 66 or over in 2018 or 2020. Accordingly, the adjustments were correct.

CONCLUSION

For the reason discussed above, the assessments are upheld. The Taxpayer will receive updated bills that will include accrued interest to date. The Taxpayer should remit the balances due within 30 days of the bill dates to avoid the accrual of additional interest and possible collection actions. If the IRS adjusts its audit findings for the 2018 or 2019 taxable years, 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 determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at (804) ***** or *****@tax.virginia.gov.

Sincerely,

James J. Alex
Tax Commissioner
Commonwealth of Virginia