Did a federal extension give a taxpayer until July 2014 to file an original 2010 Virginia return claiming a refund?

Subject

The statute of limitations for filing a return claiming a refund for the taxable year had expired

Plain-English summary

Virginia denied the remaining refund claimed on the taxpayer's original 2010 return because the return was filed in July 2014, after the refund period expired. The Department had already allowed the amount paid on a 2010 assessment to be credited toward 2011, but denied the rest of the claimed overpayment.

The taxpayer argued that a federal filing extension made the Virginia claim timely. Virginia rejected that argument. After the 2005 law change, a federal extension did not determine whether a Virginia extension existed.

Virginia's six-month extension required the return to be filed within the extended period and the properly estimated balance to be paid by the original due date. When the original return was not filed by the extended deadline, the extension was negated. The refund period therefore ran three years from May 2, 2011 and expired just after May 2, 2014.

What this means for you

• A federal extension does not by itself establish the Virginia refund deadline described in this ruling.
• Filing the original Virginia return after the extended due date can cause the refund period to revert to the original due date.
• Applying an overpayment to another year remains subject to refund law.
• Keep extension calculations, estimated-payment proof, filing confirmations, assessments, and withholding records.

Common questions

Q: Why did the July 2014 return miss the deadline?

A: With no valid Virginia extension election completed, the three-year period ran from the original May 2, 2011 due date.

Q: Did the federal extension extend Virginia's deadline?

A: No. The ruling said the federal extension had no bearing on whether Virginia's extension requirements were met.

Q: Was every part of the claimed overpayment denied?

A: The Department had allowed the paid 2010 assessment as a credit toward 2011, but denied the remaining refund claimed on the late return.

Citations and references

• Va. Code §§ 58.1-301, 58.1-341(A), 58.1-344, and 58.1-499(A), (D).
• P.D. 09-88, P.D. 10-238, P.D. 13-94, and 2005 Acts of Assembly, Chapter 100.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-77

Original ruling text

April 21, 2015

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which * (the "Taxpayer") requests a refund of individual income tax for the taxable year ended December 31, 2010.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2010 taxable year. A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. When a response was not received, the Department issued an assessment which the Taxpayer paid.

Subsequently, the Taxpayer filed a return for the 2010 taxable year in July 2014, claiming a refund due and requesting that the refund be applied as an overpayment credit towards his income tax liability for the 2011 taxable year. The amount of the refund consisted of the sum of the Taxpayer's income tax withholding and the payment of his 2010 assessment less his reported tax liability. Under review, the Department permitted the Taxpayer to apply the amount he paid for the 2010 assessment as an overpayment credit towards his 2011 tax liability. The Department, however, denied the remainder of the Taxpayer's refund on the basis that the return was filed after the statute of limitations had expired. The Taxpayer appeals, contending that he filed his Virginia income tax return within three years of the extended due date.

DETERMINATION

Virginia's conformity to federal law is set forth in Va. Code § 58.1-301, which provides that the terms used in the Virginia income tax statutes will have the same meanings as used in the IRC unless a different meaning is required. As such, Virginia's conformity to federal law is limited to the actual use of a specific term in a Virginia statute. Further, conformity does not extend to terms, concepts, or principles specifically provided for in Title 58.1 of the Code of Virginia . Accordingly, the federal extension requirements cited by the Taxpayer, while informative, have no direct impact on the Department's interpretation of Virginia statute in this case.

Although the Taxpayer requested that any overpayment of tax for the 2010 taxable year be applied against any income tax liability for the 2011 taxable year instead of a refund, the laws regarding refunds still apply. See Public Document (P.D.) 09-88 (5/28/2009). 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 Department 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.]

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. Virginia Code § 58.1-344 provides a six-month filing extension of the due date for filing the income tax return.

Taxpayers are allowed to elect to take a six month extension to file their returns. In order to elect an extension, a taxpayer must (i) file the return within the extended period, and (ii) on or before the original due date for the filing of the return, pay the full amount properly estimated as the balance of the tax due for the taxable year. See Va. Code § 58.1-344. If the taxpayer intends to take the extension but then does not file a return or pay the full amount of the tax due by the extended due date, the taxpayer is treated as if no extension had been granted. See P.D. 10-238 (9/30/2010).

When an original return has been filed after the extended due date, the taxpayer has from three years after the original due date to file an amended return. This is because Va. Code § 58.1-344 A permits an individual to elect "an extension of time within which to file the income tax return . . . ." If a taxpayer has not filed an original return by the extended due date, a valid election to extend the due date has not been made. In such cases, the extension is negated and the last day allowed for the timely filing of the return reverts to the original due date of such return.

The Taxpayer argues that because he filed a federal extension, the due date for the Virginia return was automatically extended six months from the original due date in accordance with Virginia's conformity with federal law. Prior to 2005, a taxpayer who was granted an extension of time for filing his federal income tax return could receive an extension of time for filing the Virginia return provided he filed a tentative tax return with Virginia and paid the full amount of the estimated balance of tax due in order to gain a valid extension. See P.D. 97-360 (9/05/1997). In 2005, Virginia's General Assembly eliminated the need for a taxpayer to file a federal extension in order to be granted an automatic extension for Virginia income tax purposes. See Chapter 100, 2005 Acts of Assembly . As such, the fact that the Taxpayer filed an extension for federal income tax purposes has no bearing on whether an extension was granted to file a 2010 Virginia income return. See P.D. 13-94 (6/11/2013).

In this case, the Taxpayer's original 2010 income tax return was filed beyond the extended due date for the 2010 taxable year. As such, the Taxpayer had three years from the original due date, May 2, 2011 (May 1, 2011, was on a Sunday), in which to file a timely request for refund. The statute of limitations for filing a return claiming a refund for the 2010 taxable year expired the day after May 2, 2014. The Taxpayer filed his original 2010 return in July 2014, after the applicable statute of limitations had expired. Accordingly, the Taxpayer's request for a refund of income tax paid for the 2010 taxable year is denied.

The Code of Virginia sections and public documents 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/1-5927958364.M