Tax Type
Individual Income Tax
Description
Statute of limitations for refund
Topic
Payment and Refund
Statute of Limitations
Date Issued
05-11-1990
May 11, 1990
Re: §58.1-1821 Application/ Individual Income Tax
Dear ****
This will reply to your letter dated January 10, 1990 in which the above referenced individuals ("Taxpayer") request consideration that the statute of limitations period in which to file a claim for individual income tax refund be extended under the unique circumstances presented.
FACTS
The taxpayer's federal income tax return for 1984 was adjusted by the Internal Revenue Service (IRS) early in 1987 to disallow the exclusion of disability retirement income. The taxpayer paid the assessment and notified the IRS of his intent to seek correction of the assessment through the judicial process. Furthermore, in order to avoid additional interest in the event that the taxpayer's continued treatment of his disability income in subsequent years would be ruled against by the court, the taxpayer filed amended federal returns for 1985 and 1986 and corresponding Virginia returns for 1984, 1985, and 1986 in November 1987, paying taxes therewith.
In July 1988, the taxpayer received notice that the IRS intended to make a favorable determination for the taxpayer. The taxpayer was outside of the country for medical treatment when the federal refund check dated December 23, 1988 for 1984 was mailed to his home address in Virginia. The check was forwarded to and received by the taxpayer in Switzerland in mid-January 1989. The taxpayer returned to Virginia on or about March 21, 1989.
On March 27, 1989, the taxpayer filed a second amended Virginia return for 1984, claiming a refund applicable to the federal determination made in December 1988. A copy of the 1985 amended return had to be ordered from the IRS before the taxpayer could file a refund claim for that year, a second amended return was filed in November 1989 when the copy was received.
Mid-December of 1989, when the taxpayer inquired as to the status of his refund claims, he was informed by an employee of the Department of Taxation that the 1984 and 1985 returns were out of statute, and that the payment of these refund claims by the Department was not assured.
The taxpayer requests that the statute be waived since he was precluded from filing within the statutory period. The taxpayer was under extended medical treatment when the federal determination was made and tax records for the years in question were not reasonably attainable by the taxpayer.
RULING
Va. Code §58.1-1823 provides that, "Any person filing a tax return required for any tax administered by the Department may, within three years from the last day prescribed by law for the timely filing of the return, or within sixty days from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the state tax is based, whichever is later, file an amended return with the Department." (Emphasis added.)
Generally, the last day for the timely filing of the Taxpayers' 1984 refund claim would have been February 21, 1989 (60 days after final determination of a correction in the taxpayer's federal liability) and for the 1985 refund claim would have been the latter of May 1, 1989 or 60 days after the corresponding federal refund check is issued. Therefore, the statute of limitations on the 1984 and 1985 refund claims expired prior to the filing of the second amended returns. In the event that a federal determination (i. e., the payment of a refund) is or has been made for 1985, then the statute will begin running again on the 1985 refund claim for a period of 60 days after such determination.
The courts have held that the failure of taxpayers to avail themselves of these provisions within the prescribed statutory period does not entitle them to injunctive relief. That "to hold otherwise would permit one aggrieved by an assessment to nullify the statutory method of procedure ... [and] permit him to profit by his own neglect or willfulness, and would give him an election to which a diligent litigant would not be entitled." (Todd v. County of Elizabeth City, 191 Va. 52, 60 S.E. 2d 23 (1950)).
Further, the Taxpayer could have availed himself of the provisions of Va. Code §58.1-1824, which permits taxpayers to file protective claims for refund within 3 years from the due date of any tax. The filing of such a claim could effectively have tolled the running of the statute of limitations.
Therefore, while I empathize with the taxpayer's situation, without statutory authority to authorize a refund for 1984 outside of the statute of limitations, I find no basis for granting your claim. However, contingent on the date your 1985 federal refund was issued and the date your 1985 Virginia amended return was filed, you may still qualify for a refund for that year. As such, you should furnish information on your 1985 federal refund to the department's Technical Services Section at P. O. Box 6-L, Richmond, Virginia 23282 within 60 days.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner