Tax Type
Individual Income Tax
Description
Change to federal adjusted gross income provided by I.R.S.; Amended returns
Topic
Taxable Income
Date Issued
06-12-1990
June 12, 1990
Re: §58.1-1821 Application/Individual Income Tax
Dear **************
This will reply to your letter dated December 19, 1989 seeking correction of assessments resulting from adjustments to 1984, 1985 and 1986 state income tax returns.
FACTS
The adjustments to the Taxpayers' 1984 through 1986 state income tax returns were based on information from a federal audit. The Taxpayers are currently trying to appeal the adjustments made by the Internal Revenue Service and are also seeking correction of their Virginia income tax adjustments based on the information provided to the IRS. The Taxpayers also request an explanation of the basis for computing the principal and interest in the 1984 through 1985 assessments.
DETERMINATION
The additional assessments for the years 1984 through 1986 were the result of audit abstract information received by the department from the Internal Revenue Service under the State/Federal Tax Information Exchange Agreement.
Virginia income tax statutes conform with the federal Internal Revenue Code. Accordingly, Virginia law provides that the starting point for the state income tax is federal adjusted gross income with certain modifications specified in Virginia Code §58.1-322. Thus, when any changes in a taxpayer's federal taxable income are reported by the IRS to the department, the taxpayer's Virginia taxable income is adjusted accordingly, as was the case with the Taxpayers' income tax returns for 1984 through 1986.
The adjustments in the Taxpayers' assessments were based on the addition to their federal taxable income resulting from the IRS audit and the corresponding additional Virginia tax due, plus interest which accrued from the due date of the original returns until the date the assessments were paid. The interest was computed, pursuant to Va. Code §58.1-15, at the rate equal to the rate of interest established pursuant to §6621 of the Internal Revenue Code of 1954, as amended.
Once the Taxpayers have resolved this matter with the IRS, the Taxpayers should provide to the department, within ninety days of the final determination of the IRS, information on the changes in taxable income. Additionally, if the Taxpayer files an amended federal income tax return, it is also required to file within ninety days, an amended Virginia income tax return. However, an amended return claiming refund for overpayment of tax must be filed within sixty days of the final determination of any changes in federal tax liability. See the enclosed copy of Virginia Individual Income Tax Regulation 630-2-311.
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner