February 12, 2025
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 assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2018.
FACTS
The Internal Revenue Service (IRS) notified the Department that it had adjusted the Taxpayer’s 2018 federal income tax account. 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 change 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 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 was increased due to an IRS examination.
For the taxable year at issue, the Taxpayer mailed paper income tax returns to both the IRS and Virginia. It appears that the IRS did not receive the Taxpayer’s return and issued an assessment based on a substitute return that did not include the Taxpayer’s business expenses. The Taxpayer asserts that he is working with the IRS to correct the assessment. The Department has requested evidence to support that claim but, to date, no evidence has been provided. In addition, as of December 2024, the IRS account transcript did not reflect any IRS adjustments to the Taxpayer’s account. 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).
Under these circumstances, the Department finds no basis to abate the assessment. The Department will, however, allow the Taxpayer one final opportunity to submit documentation evidencing that he is actively working with the IRS to resolve the matter. The documentation should be submitted within 60 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****.
If sufficient documentation is not received within the allotted time, the assessment will be considered correct, the Taxpayer will receive an updated bill that will include accrued interest to date, and collections actions may result.
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 and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4916.X