Tax Type
Individual Income Tax
Description
Untimely filing; Refund request; Amended return
Topic
Accounting Periods and Methods
Returns/Payments/Records
Date Issued
03-04-1994
March 4, 1994
Re: §58.1-1821 Application: Individual Income Tax
Dear****************
This will reply to your letter of August 30, 1993 which you request that the department reconsider its determination letter of November 18, 1991, (P.D. 91-287) denying your clients'************* (the "Taxpayers"), application for correction of an assessment.
FACTS
The Taxpayers filed an amended return with the Internal Revenue Service (the "Service") for taxable year 1984 claiming an adjustment to a federal assessment. The Service denied the claim stating that the amended return was not timely filed. The Taxpayers later filed an amended return for taxable year 1984 with the department claiming the assessment should be abated based on their proposed federal adjustments. The request was denied.
The department has collected the outstanding assessment from the Taxpayers' 1989 refund. You are now asserting that the Taxpayers had two years from the collection of the assessment to file for a refund pursuant to federal law.
DETERMINATION
Virginia is a conformity state in regard to the determination of Virginia taxable income since Virginia taxable income is based upon the amount of federal adjusted gross income reported to the Service with certain adjustments. Virginia does not, however, follow federal procedural law, contrary to your assertion.
A taxpayer is only entitled to apply for a refund of taxes if an amended return is filed with the department within three years of the date that the original return was due. For calendar year taxpayers,
returns are due on May 1 of the year following the close of a taxable year.
For taxable year 1984, the Taxpayers should have filed an amended return with the department on or before May 1, 1988. Unfortunately, the Taxpayers did not file the amended return until February 1991, several years after the expiration of the three-year limitations period.
Virginia law also allows a taxpayer to file an amended return for taxable years in which the Service allows a federal adjustment despite the expiration of the three-year period within 90 days of the Service's final approval of such adjustments. To the extent that a federal change or adjustment does not occur for taxable years in which the Virginia three-year statute of limitations has expired, a Virginia adjustment will not be allowed.
Va. Code §58.1-1823 does not make any distinction between federal adjustments that would have been allowed had the amended return been timely filed, or denial of a federal change based upon the substance of a particular issue. It merely allows taxpayers to file an amended return within 90 days of the final determination of any federal tax change or correction.
In a letter dated February 19, 1991, the Service denied the adjustments the Taxpayers made to their 1984 amended federal return since the statute of limitations had expired. Despite that fact that the denial was based upon a procedural issue, there was no federal change which provided the Taxpayers with the 90 day window to file an amended return with the department.
Further, the Service did not accept the federal adjustments. It merely denied the refund based upon a procedural issue. There is no evidence which indicates that the Service would have accepted the proposed changes since it did not address the substantive issues .
Therefore, your request that the Taxpayers' account be adjusted in accordance with the amended Virginia return is hereby denied.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7480O
Rulings of the Tax Commissioner