Did a Virginia-domiciled travel nurse owe Virginia tax on wages earned in other states?

Plain-English summary

Virginia required the travel nurse to file resident returns and report wages earned outside Virginia because she had not abandoned Virginia domicile. A resident's Virginia calculation began with federal adjusted gross income, not only Virginia-source wages.

That did not necessarily mean double tax. Virginia allowed residents a credit for qualifying income tax paid to another state on earned or business income and certain capital gains. Based on the information presented, the nurse qualified for the credit on her out-of-state employment income.

The Department's assessments were based on available federal information because she had not filed Virginia returns. The ruling gave her 30 days to file accurate 2007 and 2008 returns so Virginia could adjust the income and credits.

What this means for you

• A Virginia domiciliary generally files as a resident even while working elsewhere.
• Resident taxation reaches out-of-state wages included in FAGI.
• Keep other-state returns and proof of tax paid for the Virginia credit.
• File complete returns rather than leaving liability to an estimate.

Common questions

Q: Did the nurse claim that she changed domicile?
A: No. She admitted that she had not changed Virginia residency.

Q: Could Virginia tax wages earned elsewhere?
A: Yes, as resident income.

Q: Could she claim relief for the other-state tax?
A: Yes, the ruling found that she qualified for the statutory credit.

Citations and references

• Va. Code §§ 58.1-301, 58.1-321, 58.1-322, 58.1-332, and 58.1-341.
• IRC § 6103(d).

Subject

Taxpayer did not abandon Virginia domicile while employed outside its borders

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-159

Original ruling text

September 19, 2011

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 assessments issued to * (the "Taxpayer") for the taxable years ended December 31, 2007 and 2008. I apologize for the delay in responding to your appeal.

FACTS

The Department received information from the Internal Revenue Service (IRS) that the Taxpayer received wages that may be subject to Virginia income tax. The Department requested information from the Taxpayer to determine her Virginia taxable income. When no response was received, the Department issued assessments for the 2007 and 2008 taxable years.

The Taxpayer appeals the assessments, contending that she was employed as a travel nurse and did not receive income from Virginia sources, nor did she reside in Virginia during the taxable years in question. While the Taxpayer admits that she did not change her residency from Virginia, she paid income tax to the states in which the income was earned.

DETERMINATION

Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code unless a different meaning is clearly required. For individual income tax purposes, Virginia conforms to federal law in that it starts the computation of Virginia taxable income with FAGI. Income included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it's specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.

Virginia Code § 58.1-341 provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Va. Code § 58.1-321. When a resident does not file a Virginia income tax return, § 6103(d) of the Internal Revenue Code authorizes the Department to obtain information from the IRS that will help in determining the resident's tax liability. Because the Taxpayer did not abandon her Virginia domicile while employed outside its borders, she was required to file Virginia income tax returns for the 2007 and 2008 taxable years.

Virginia Code § 58.1-332 does permit a credit to Virginia residents on their Virginia individual income tax return for income taxes paid to another state, provided the income is either earned or business income, or gain from the sale of a capital asset upon proof of such payment. Based on the information provided, the Taxpayer qualifies for the credit for income earned from her employment outside Virginia.

The assessments at issue are based on the information available to the Department. The Taxpayer may have additional information that more accurately reflects her taxable income. Therefore, it may be advisable for the Taxpayer to file 2007 and 2008 Virginia individual income tax returns in order to more accurately reflect her tax liability. The returns should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *.

Upon receipt, the returns will be reviewed and processed, and the assessments for the taxable years in question will be adjusted as warranted. If the returns are not received within the time provided, the assessments will be adjusted based on the information available.

The Code of Virginia sections 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,

Craig M. Burns

Tax Commissioner

AR/1-4687792702.D