Could a taxpayer challenge old Virginia income tax assessments and overturn later estimates without filing returns or records?

Subject

Filing Requirements, Statute of Limitations

Plain-English summary

Virginia declined to consider the taxpayer's challenge to the 2007 through 2010 assessments because his December 2016 appeal came long after the 90-day deadline. Those assessments had been issued on February 3, 2012, making May 3, 2012 the appeal deadline.

The appeal of the September 20, 2016 assessments for 2011 through 2014 was timely, but the taxpayer provided no evidence that he was not required to file Virginia resident returns and no records from which the Department could calculate a different liability. The Department therefore upheld its estimated assessments based on the best information available.

The taxpayer was given 30 days to file 2011 through 2014 resident returns so the Department could adjust those assessments as appropriate. If he failed to do so, the estimates would remain correct as issued; the older assessments remained due.

Citations and references

• Va. Code §§ 58.1-1820 and 58.1-1821.
• Va. Code §§ 58.1-341 and 58.1-321.
• Va. Code §§ 58.1-111, 58.1-205, and 58.1-1826.
• IRC § 6103(d).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-190

Original ruling text

November 16, 2017

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 assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 2007 through 2014. I apologize for the delay in responding to your appeal.

FACTS

In 2011, the Department obtained information indicating the Taxpayer may have been required to file Virginia individual income tax returns for the 2007 through 2010 taxable years. The Department requested information from the Taxpayer to verify whether he was subject to Virginia income tax. When an adequate response was not received, the Department issued assessments for taxable year 2012 based on information available. In 2016, the Department conducted a similar review and issued assessments for 2011 through 2014. The Taxpayer appeals the assessments, contending the assessments are based on incorrect information.

DETERMINATION

Appeal - Statute of Limitations

Virginia Code § 58.1-1821 states, “Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner. Such application shall be in the form prescribed by the Department and shall fully set forth the grounds upon which the taxpayer relies and all facts relevant to the taxpayer's contention.” Pursuant to Va. Code § 58.1-1821 and Title 23 of the Virginia Administrative Code (VAC) 10-20­165, a complete appeal must be filed with the Department within 90 days from the date of assessment. In addition, Va. Code § 58.1-1820 provides that assessments made by the Department are deemed to be made when a written notice of assessment is mailed to a taxpayer at his last known address.

The Taxpayer filed an appeal for the taxable years at issue with the Department by correspondence postmarked December 19, 2016. The assessments for the taxable years 2007 through 2010 were issued February 3, 2012. Pursuant to Va. Code § 58.1­-1821, the Taxpayer was required to file his administrative appeal for those assessments within 90 days of the date of assessment, or no later than May 3, 2012. The Taxpayer's appeal for the 2007 through 2010 taxable years was filed well after the expiration of the statute of limitations. Accordingly, the Department does not have jurisdiction to address the appeal as it applies to those years.

The assessments for taxable years 2011 through 2014 were issued on September 20, 2016. The appeal for these taxable years was filed within the 90-day limitations period under Va. Code § 58.1-1821. Therefore, the remainder of this determination will be limited to these taxable years.

Filing Requirements

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 taxpayer fails or refuses to provide documentation sufficient to calculate an accurate liability, Va. Code § 58.1-111 permits the Department to make an estimate of the amount of taxes due from any information in its possession and issue an assessment to such taxpayer. Further, Internal Revenue Code (IRC) § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine the resident's tax liability. Other than his assertion that the 2011 through 2014 are based on inaccurate information, the Taxpayer has provided no evidence that he was not required to file Virginia income tax returns or documentation on which to compute accurate liabilities.

Pursuant to Va. Code § 58.1-205, any “assessment of tax by the Department shall be deemed prima facie correct. As such, the burden of proof is on the Taxpayer to show he was not subject to Virginia income tax. Furthermore, Va. Code § 58.1­-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is a ttributable to the taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.

As indicated above, the assessments for the 2011 through 2014 taxable years were made based on the best information available pursuant to Va. Code § 58.1-111. Because the Taxpayer was required to file Virginia income tax returns, the Department was correct in making the assessments. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable years at issue. Therefore, he should file his 2011 through 2014 Virginia resident income tax returns to more accurately reflect his Virginia tax liability.

The returns should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *. Upon receipt, the returns will be processed and the assessments will be adjusted, as appropriate. If the returns are not received within the allotted time, the assessments for the 2011 through 2014 taxable years will be considered to be correct as issued and collection actions may result.

The assessments for the 2007 through 2010 taxable years remain due and payable. The Taxpayer will receive a bill with updated interest. The bill should be paid within 30 days of the bill date to avoid the accrual of additional interest.

The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Laws, Rules and 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/1122.o