Did paying income tax to a former state excuse a full-year Virginia resident from filing a 2012 Virginia return?

Subject

Wrong-state withholding did not remove Virginia filing duty

Plain-English summary

Paying tax to another state did not excuse the taxpayer's Virginia resident return. He had moved to Virginia and lived and worked there throughout 2012, but his employer continued withholding tax for his former state.

The taxpayer was responsible for notifying the employer of the changed withholding status. Any mistaken return or payment to the former state had to be addressed under that state's refund rules.

Result: Virginia gave him 30 days to file a 2012 resident return. The Department would process it and adjust the information-based assessment; otherwise, the assessment would stand.

What this means for you

• Update payroll withholding promptly after moving states.
• Wrong-state withholding does not replace a resident-state return.
• Seek any refund from the state that received tax in error.
• File the actual return to replace an estimated nonfiler assessment.

Common questions

Q: Did the other-state return prove no Virginia tax was due?

A: No. The taxpayer was a full-year Virginia resident.

Q: Who had to correct the withholding status?

A: The taxpayer had to inform the employer.

Citations and references

• Va. Code §§ 58.1-111, 58.1-301, 58.1-302, 58.1-321, and 58.1-341; IRC § 6103(d).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-198

Original ruling text

October 19, 2015

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 * (the "Taxpayer") for the taxable year ended December 31, 2012.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 taxable year. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. When a response was not received, the Department issued an assessment based on the available information. The Taxpayer appealed the assessment, contending that he already paid income tax to * (State A) for the 2012 taxable year.

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 (IRC) 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 federal adjusted gross income (FAGI). Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is 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. Additionally, even if a resident is not required to file a federal return but has Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia individual income tax return. When a resident does not file a proper Virginia return, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine the resident's tax liability.

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia.

The Taxpayer had moved to Virginia from State A and lived and worked in Virginia the entire 2012 taxable year. The Taxpayer filed a State A tax return. He indicates that he filed in State A because his employer continued to withhold State A income tax.

The mere fact that the Taxpayer filed a State A income tax return and paid income tax to State A had no bearing on his requirement to file a Virginia income tax return as a Virginia resident. Further, it is a taxpayer's responsibility to inform their employer when there is a change to their withholding status. The Taxpayer should review State A's income tax laws to determine whether he mistakenly filed the State A return and request a refund of taxes erroneously paid to State A, if warranted.

The assessment at issue was based on information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayer may have additional information that would more accurately reflect his Virginia taxable income. Accordingly, the Taxpayer should file a Virginia income tax return for the 2012 taxable year. The return should be submitted to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *, within 30 days from the date of this letter. Once the return is received, it will be reviewed and processed and the assessment adjusted accordingly. If the return is not received within the allotted time, the Department's assessment will be considered to be correct as issued and collection actions will resume.

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 determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-605544777.M