March 13, 2024
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek a refund of the overpayment of individual income tax paid by ***** and ***** (the “Taxpayers”) for the taxable year ended December 31, 2017.
FACTS
The Taxpayers, a husband and wife, resided in Virginia during the taxable year at issue. The husband died in October 2019. The Taxpayers filed a 2017 Virginia individual income tax return in May 2021, reporting an overpayment of income tax and requesting that the overpayment be credited as an estimated payment for the following taxable year. The Department denied the credit because the return was filed beyond the refund period allowed by the statute of limitations. The denial of the overpayment credit caused a corresponding increase in the amount of tax for the 2018 taxable year, and an assessment was issued. The Taxpayers paid the assessment and appealed, contending that the husband’s death, the COVID-19 pandemic, and the wife’s health problems all contributed to the late filing of the return.
DETERMINATION
Statute of Limitations for Refunds
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:
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.]
Although the Taxpayers have not requested an actual refund, but have requested that an overpayment of tax for the 2017 taxable year be applied against the income tax liability for the 2018 taxable year, the laws regarding refunds applies. As stated above, Virginia Code § 58.1-499 requires that an application for refund must be received within three years from the last day prescribed by law for the timely filing of the return. See Public Document (P.D.) 09-88 (5/28/2009). See also Joseph Richard Azar vs. Virginia Dep’t of Taxation, Circuit Court of Arlington County, Case No. 16-1910, the final order for which is reported as P.D. 17-140 (6/30/2017). The Taxpayers’ 2017 Virginia individual income tax return was due on May 1, 2021. Their return was filed on May 13, 2021, which was beyond the three year statute of limitations after the due date of the return for requesting a refund or the crediting of an overpayment to the following taxable year.
Deceased Taxpayers
The Taxpayers state that the death of the husband was an obstacle in timely filing the return. Virginia law addresses the requirements of filing returns for taxpayers who have died. Virginia Code § 58.1-341 E provides that a return must be timely filed by a taxpayer’s executor, administrator, or other person charged with his property upon the death of a taxpayer. Regardless of the husband’s death, the wife or other person legally accountable for filing the income tax return was required to timely file the return.
Pandemic
The Taxpayers also assert that the COVID-19 pandemic was a factor in the late filing of the 2017 return. The due date of the Taxpayers’ 2017 Virginia return was nearly two years prior to the start of the pandemic. While the Governor announced certain income tax filing and payment relief as a result of the pandemic, there was no filing extension that would have impacted individual income tax returns other than those being filed for the 2020 taxable year. See Virginia Tax Bulletin (VTB) 20-4 (3/20/2020) and VTB 21-5 (4/9/2021).
Medical Conditions
The Taxpayers cite a serious injury to the wife and her deteriorating mental health condition as affecting her ability to timely file her return. Virginia Code § 58.1-341 F provides that an individual who is unable to make a return because of a disability has the responsibility of having such return filed by a fiduciary or duly authorized agent. Thus, Virginia law addresses the requirements of filing returns for taxpayers who have disabilities. While a severe illness or medical condition may be considered a disability for purposes of Virginia Code § 58.1-341 F, the statute does not provide for the suspension of the statute of limitations for an individual who is mentally or physically disabled. See P.D. 10-204 (9/2/2010).
CONCLUSION
The provisions of Virginia Code § 58.1-499 D are clear and do not provide the Department with any discretion in enforcing the three-year limitations period to apply for a refund. Accordingly, while I empathize with the Taxpayers’ difficult circumstances, the Department was correct in denying the overpayment credit claimed on the 2017 return and making the corresponding adjustment to the 2018 return. Because the balance of the liability due for the 2018 taxable year has been paid by the Taxpayers, no further action is required.
The Code of Virginia sections, Tax Bulletins 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 regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4445.B