Could a divorced spouse make Virginia collect a joint-return assessment only from the former spouse after he paid the related federal debt?

Subject

A husband and wife who file a joint tax return are liable jointly and individually for their tax liabilities.

Plain-English summary

A married couple filed a joint 2008 Virginia return. After an IRS audit increased their federal adjusted gross income, Virginia assessed additional state tax and interest because the couple did not report the federal change on an amended Virginia return.

The spouses later divorced. The husband argued that because he had paid the federal debt, Virginia should collect the state assessment from his former wife.

Virginia rejected that request. A joint return made both spouses jointly and individually liable for the entire tax arising from it. Divorce did not divide the Department's collection rights, so the assessment remained outstanding until paid by either former spouse.

What this means for you

• Each spouse signing a joint Virginia return can be liable for the full resulting tax debt.
• A later divorce does not automatically allocate the debt between former spouses for state collection purposes.
• Paying a related federal assessment does not pay the separate Virginia liability.
• Federal audit changes must be reported to Virginia within one year.

Citations and references

• Va. Code §§ 58.1-311, 58.1-312 A 3, and 58.1-341 B 1.
• 23 VAC 10-110-240 C 3 b.
• P.D. 15-251.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-132

Original ruling text

July 19, 2017

Re: § 58.1-1821 Application: Individual Income Tax

Dear *”

This will reply to your letter regarding collection of the individual income tax assessment issued to * (the “Taxpayers”) for the taxable year ended December 31, 2008.

FACTS

The Taxpayers, a husband and wife, filed a 2008 Virginia income tax return and received a refund for overpayment of tax. The Internal Revenue Service conducted an audit resulting in an increase in the Taxpayers' federal adjusted gross income (FAGI). The Department issued an assessment for additional tax and interest based on the federal adjustments. The husband appeals the assessment, contending he paid the debt on the federal tax and the Department must pursue collections of the state tax liability from his ex-wife.

DETERMINATION

Virginia Code § 58.1-311 requires any individual to report a change or correction in federal taxable income within one year of the final determination of such change or correction by filing an amended return with the Department. If the taxpayer fails to file an amended return, Va. Code § 58.1-312 A 3 permits the Department to assess the appropriate tax at any time. The Taxpayers failed to file a Virginia amended income tax return to report the changes to their FAGI.

Virginia Code § 58.1-341 B 1 provides that a husband and wife who file a joint tax return are liable jointly and individually for their tax liabilities. Title 23 of the Virginia Administrative Code (VAC) 10-110-240 C 3 b provides that joint and several liabilities means that each party to the return is individually liable for its contents and the entire tax liability arising therefore and further entails a joint or several obligation.

The Taxpayers were divorced after filing a joint 2008 Virginia return. The husband believes he should not be held liable for the Virginia assessment because he paid their federal debt. In Public Document (P.D.) 15-251 (12/23/2015), the Department found that in instances where taxpayers divorced after incurring a joint tax liability, both individuals would share the responsibility of their debt. Thus, each party to the return is individually liable for its contents and the entire tax liability arising therefrom and further entails “a joint or several obligation.”

Accordingly, the assessment of additional tax is upheld and will remain outstanding until paid by either the husband or his former spouse. An updated bill will be issued shortly. Payment of the outstanding balance as shown on the bill should be remitted within 30 days from the date of the bill to avoid the accrual of additional interest.

The Code of Virginia sections, regulation and public document 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/734.D