Could accountant error or financial hardship extend Virginia's deadline for claiming a refund on a late 2006 return?

Subject

Accountant error and hardship did not extend refund deadline

Plain-English summary

Virginia denied the refund because the original 2006 return was filed nearly three years after the refund deadline expired. The return was due May 1, 2007, and the three-year refund period ended May 3, 2010 because May 1 fell on a Saturday. The taxpayers filed in January 2013.

Reliance on an accountant did not relieve the taxpayers of responsibility for ensuring the return was filed, and financial hardship did not give the Department discretion to extend the statutory period. The ruling noted that a taxpayer harmed by erroneous professional advice may have recourse against the professional.

What this means for you

• Confirm that a preparer actually filed the return and retain acceptance proof.
• Refund deadlines can expire even when the overpayment is real.
• Hardship and preparer error do not authorize the Department to ignore a mandatory limitations period.

Citations and references

• Va. Code §§ 58.1-499 A and D and 58.1-341 A.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-101

Original ruling text

July 2, 2014

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you request a refund for the overpayment of the individual income tax paid by * (the "Taxpayers") for the taxable year ended December 31, 2006. I apologize for the delay in responding to your request.

FACTS

The Taxpayers filed a 2006 Virginia income tax return in January 2013 reporting an overpayment of income tax and claiming a refund. The Department denied the refund because the return was filed beyond the refund period allowed by Virginia's statute of limitations. The Taxpayers appeal the Department's denial, contending the failure to file resulted from an error by their accountant and they are facing financial hardship.

DETERMINATION

Virginia's taxing system is based largely on the theory of self assessment. A taxpayer computes his own income and tax, fills out his own return, files the return, and pays the tax indicated. Virginia has implemented a self-assessment system based on the federal system because it is less intrusive upon taxpayers, simpler, and less costly to administer. Consequently, taxpayers are responsible for the information provided on income tax returns.

Under the circumstances, a taxpayer's reliance on an accountant to prepare income tax returns, while understandable, does not relieve the taxpayer of the responsibility for ensuring that the return is filed and the information reported on the return is accurate. Further, in a situation where a taxpayer relies on an accountant, lawyer, tax preparer or other tax professional and such professional provides inaccurate or erroneous advice that results in a liability, the taxpayer has recourse against the tax professional for the error.

As for the request for refund, Va. 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 Department shall order a refund of the overpayment. Virginia Code § 58.1-499 D specifies, however, in pertinent part that:

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.]

Virginia Code § 58.1-341 A requires that a taxpayer file an individual income tax return by May 1 of the year following the tax year for which the return is filed. Based on Virginia statues, the due date for the Taxpayers' 2006 individual income tax return was May 1, 2007. As such, a return was required to be filed by May 1, 2010, in order to receive a refund for the 2006 taxable year.

The original 2006 Virginia income tax return was not filed until January 2013, well after the statute of limitations had expired on May 3, 2010 (May 1, 2010 fell on a Saturday). The provisions of Va. Code § 58.1-499 D are clear and do not provide the Department with any discretion in enforcing the three-year limitations period to apply for a refund. Accordingly, I must deny your request for refund of the overpayment of individual income tax for the taxable year ended December 31, 2006.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5391125950.D