Could a 2003 overpayment reported on an August 2007 original return be credited against a 2004 Virginia assessment?

Subject

Late 2003 return could not carry its overpayment into 2004

Plain-English summary

Virginia denied the taxpayer's request to credit a 2003 overpayment against her 2004 assessment. She waited to file 2001-2004 returns until pass-through entities finalized their financial information in August 2007.

The 2003 refund or credit limitation period expired May 1, 2007. Her original 2003 return arrived August 29, 2007.

Virginia applied the refund statute even though she requested an overpayment credit rather than a cash refund. The reasons for delay, good-faith filing, and adequate estimated payments did not extend the deadline. The 2004 assessment therefore remained due, and the unused 2003 overpayment could not carry to later years.

What this means for you

• A carryforward or offset request can be subject to the same deadline as a refund.
• Waiting for pass-through information did not preserve the claim automatically.
• Estimated payments did not extend the time to report and use an overpayment.
• Each tax year's limitation period operated separately.

Common questions

Why was the deadline May 1, 2007?

Virginia measured three years from the last day prescribed for timely filing of the 2003 return.

Could the excess be carried to a later year instead?

No. Once the refund or credit period expired, Virginia would not apply the overpayment to 2004 or subsequent years.

Citations and references

• Va. Code §§ 58.1-341(A) and 58.1-499(A), (D).
• P.D. 06-136.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 09-88

Original ruling text

May 28, 2009

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to your client, * (the "Taxpayer") for the taxable year ended December 31, 2004.

FACTS

The Taxpayer timely filed her 2000 Virginia individual income tax return, but failed to timely file Virginia individual income tax returns for the 2001 through 2004 taxable years. In late August 2007, she filed an amended 2000 return and original returns for 2001 through 2004.

The 2003 return reported an overpayment that she requested be credited on her 2004 tax. The Department disallowed the overpayment credit claimed on the 2003 return because the statute of limitations for claiming a refund or overpayment credit had expired. An assessment of tax, addition to tax, and interest was issued for the 2004 taxable year.

The Taxpayer contends that she filed her returns late because she was waiting for pass-through entities to finalize their financial information. She states the required information was received in August 2007, and she immediately filed the appropriate returns. The Taxpayer has requested that the assessment be abated because the returns were filed in good faith when the pass-through entities finalized their financial information. She avers that the Commonwealth suffered no financial harm because adequate estimated tax had been paid. The Taxpayer also requests that the 2003 overpayment less the amount required to satisfy the 2004 liability be carried forward to subsequent taxable years.

DETERMINATION

Virginia Code § 58.1-499 A provides that in the case of any overpayment of any tax, whether by reason of excessive withholding, overestimating and overpaying estimated tax, or error on the part of the taxpayer, the Tax Commissioner shall order a refund of the overpayment. Virginia Code § 58.1-499 D specifies, however, in pertinent part:

No refund under this section . . . shall be made . . . whether on discovery by the Department or on written application of the taxpayer, if such discovery is not made or such written application is not received within three years from the last day prescribed by law for the timely filing of the return . . . . [Emphasis added.]

Although the Taxpayer has not requested an actual refund, but has requested that any overpayment of tax for the 2003 taxable year be applied against the assessment for 2004, the laws regarding refunds still apply. As stated above, Va. Code § 58.1-499 requires that an application for refund must be received within three years from the last day prescribed by law for the timely filing of the return. See Public Document (P.D.) 06-136 (10/30/2006).

Virginia Code § 58.1-341 A requires that taxpayers file individual income tax returns by May 1 of the year following the tax year for which the return is filed. The statute of limitations for the 2003 taxable year expired on May 1, 2007. The Taxpayer's original return for 2003 was filed on August 29, 2007. As such, the 2003 return was not filed within the limitations period provided in Va. Code § 58.1-499, and the overpayment cannot be credited to the 2004 taxable year.

Accordingly, based on the clear requirements under the law I must deny you request for the abatement of the 2004 assessment. A revised bill, with interest accrued to date, will be sent to the Taxpayer. No additional interest will accrue provided the outstanding balance is paid within 30 days from the date of the revised bill.

The Code of Virginia sections and public document cited are available on-line www.tax.virginiai.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/1-2555094803.B