How much refund could a taxpayer receive after filing a part-year return beyond the normal three-year deadline?

Subject

Late part-year return allowed a refund of only one recent assessment payment

Plain-English summary

Virginia refunded only one payment made on the old assessment. The taxpayer did not file a 2000 Virginia return until November 2006, after the ordinary three-year refund period. The claim also did not arise from an IRS change, so the cited 60-day federal-adjustment extension did not apply.

A separate rule allowed a refund claim within two years after payment of an assessment, limited to issues relating solely to that assessment and capped by the payment. Looking back two years from the November 2006 return, Department records found only one payment under the payment plan.

Virginia therefore issued a refund of that one eligible payment plus applicable interest; the earlier payments remained outside the refund window.

What this means for you

• A late original or amended return can sharply limit the refundable payment period.
• The federal-change extension applies only to the specific IRS change that produces the overpayment.
• Track each assessment payment date separately; later payments may remain refundable after earlier ones expire.
• Preserve the assessment, payment history, federal final determination, and filing proof.

Common questions

Did the IRS-information assessment count as a later federal change?

No. The taxpayer showed no federal liability change that caused the refund request.

Why did only one payment qualify?

It was the only assessment payment made within two years before the late return was filed.

Was interest included?

Yes, applicable interest was to accompany the eligible refund.

Citations and references

• Va. Code §§ 58.1-499(D) and 58.1-1823(A)(iv).
• P.D. 99-148.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 09-8

Original ruling text

February 4, 2009

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter concerning the Virginia individual income tax assessments issued to * (the "Taxpayer") for the taxable year ended December 31, 2000.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer, a Virginia resident, had income for the 2000 taxable year. The Taxpayer did not file a Virginia individual income tax return for the 2000 taxable year. The Department requested additional information in order to accurately determine the Taxpayer's liability. The Taxpayer failed to respond and was assessed individual income tax liability as a full year resident in March 2003.

The Taxpayer paid the assessment pursuant to a payment plan from August 2003 through November 2004. In November 2006, the Taxpayer filed a part-year return for the 2000 taxable year. The Taxpayer also submitted a letter requesting a refund citing Va. Code § 58.1-499 D. The Department denied the refund because the return was filed beyond the three-year statute of limitations.

The Taxpayer appeals the denial of the refund, contending the refund was requested timely because the request was made within 60 days of a final determination of any change or correction in the liability of a federal tax on which the state tax is

based.

DETERMINATION

Virginia Code § 58.1-499 D requires the Department to issue a refund if the discovery of an overpayment is made "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 . . ." In Public Document 99-148 (6/21/99), the Department ruled that the statute of limitations for refunds resulting from a change to federal tax liability is limited to those specific changes made by the IRS. Although the Taxpayer believes that her letter of March 2007 meets the standard of Va. Code § 58.1-499 D, there is no evidence that this refund request resulted from any change in a federal tax liability.

Virginia Code § 58.1-1823 A (iv) provides that an amended return claiming a refund can be timely filed within "two years from the payment of an assessment, provided that the amended return raises issues relating solely to such assessment and that the refund does not exceed the amount of such payment." Under this section, only payments made within 2 years of the assessment, for which the refund is requested, are eligible for a refund.

In this case, the part-year return for the 2000 taxable year was clearly filed beyond the standard three-year statute of limitations period. Thus, only those payments made on the 2000 taxable year assessment made within two years of the Taxpayer's filing of the part-year return in November 2006 are eligible for refund.

The Department's records show only one payment made pursuant to the payment plan within two years of the part-year return filing. Accordingly, a refund will be issued for the one eligible payment, plus applicable interest accrued.

This letter is the Department's final determination regarding this matter. The Code of Virginia sections and public document cited are available on-line www.tax.virginia.gov in the Tax Policy Library 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,

Janie E. Bowen

Tax Commissioner

AR/1-2451591698.E