Could a taxpayer reverse Virginia's W-2-based corrections to federal adjusted gross income and withholding without objective contrary evidence?

Subject

The Department adjusted the Taxpayer's FAGI to match the amount of income reported on the Taxpayer's federal Wage and Tax Statement (Form W-2).

Plain-English summary

Virginia found that the taxpayer apparently entered the amount of Virginia income tax withheld from wages as his federal adjusted gross income. The Department corrected federal adjusted gross income and Virginia withholding to match the W-2 and included a personal exemption.

Virginia individual income tax begins with federal adjusted gross income. Federal law also permits the Department to obtain IRS information needed to determine a resident's liability.

An assessment is presumed correct under Va. Code § 58.1-205, so the taxpayer had to show that the W-2-based corrections were wrong. He supplied no objective evidence doing so. Virginia therefore found no basis to abate the 2012 assessment.

An updated bill including accrued interest would be issued, and the ruling advised payment within 30 days of that bill to avoid additional interest.

Common questions

What mistake did Virginia identify? The taxpayer appeared to report the W-2's Virginia withholding amount as federal adjusted gross income.

What evidence supported the correction? Virginia used the income and withholding shown on the federal W-2 and information available under its statutory authority.

Why did the appeal fail? The assessment was presumed correct, and the taxpayer provided no objective evidence that Virginia's adjustments were wrong.

Citations and references

• Va. Code §§ 58.1-111, 58.1-205, 58.1-301, and 58.1-322.
• IRC § 6103(d).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-24

Original ruling text

March 8, 2016

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 Taxpayer filed a 2012 Virginia individual income tax return. Under review, the Department made adjustments to federal adjusted gross income (FAGI), Virginia withholding and a personal exemption. The adjustments resulted in additional tax due, and the Department issued an assessment. The Taxpayer appeals, contending that the adjustments were incorrect.

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 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.

IRC § 6103(d) authorizes the Department to obtain information from the Internal Revenue Service (IRS) that will enable the Department to determine a resident's tax liability. In this case, it appears that the Taxpayer mistakenly reported that his FAGI was the same amount as the amount of Virginia income tax withheld from his wages. As a result, the Department adjusted the Taxpayer's FAGI to match the amount of income reported on the Taxpayer's federal Wage and Tax Statement (Form W-2). The Department also adjusted the amount of Virginia income tax withholding to match the amount reported on the W-2. In addition, the Department's adjustments included an allowance for a personal exemption.

Under the provisions of Va. Code § 58.1-205, in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show the Department's assessment is incorrect. The Department adjusted the Taxpayer's return based on the information available as permitted by Virginia statute. See Va. Code § 58.1-111. The Taxpayer has provided no objective evidence to show that the Department's assessment was incorrect. Therefore, I find no basis to abate the assessment for the 2012 taxable year.

The Taxpayer will receive an updated bill with accrued interest to date. The Taxpayer should remit payment of the outstanding balance within 30 days of the updated bill date to avoid the accrual of additional interest.

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/1-6219670375.M