Did medical disability extend Virginia's deadline to claim a 2012 income tax overpayment credit?

Subject

Statute of Limitations, Refunds

Plain-English summary

Virginia denied the taxpayers' request to apply their 2012 income tax overpayment to 2013 because their original 2012 return was filed after the refund statute of limitations expired.

Federal law can toll a federal refund period when a taxpayer is financially disabled, but Virginia conformity does not automatically import that federal rule. Virginia law instead requires a person unable to file because of disability to have a fiduciary or authorized agent file the return, and it does not suspend the state refund deadline.

The 2012 Virginia return was due May 1, 2013. Because May 1, 2016 fell on a Sunday, the last day to file within the three-year period was May 2, 2016. The taxpayers did not file until January 2017, and the Department said it had no discretion to allow the credit.

Citations and references

• Va. Code §§ 58.1-301, 58.1-341(A) and (F), and 58.1-499(A) and (D).
• IRC § 6511.
• P.D. 10-204 and P.D. 09-88.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-194

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 a refund of the overpayment of individual income tax paid by * (the “Taxpayers”) for the taxable year ended December 31, 2012.

FACTS

The Taxpayers filed a 2012 Virginia individual income tax return in January 2017, reporting an overpayment of income tax and requesting that the overpayment be credited as an estimated payment for the following taxable year. The Department denied the credit because the return was filed beyond the refund period allowed by the statute of limitations. The Taxpayers appeal the Department's denial, contending the husband's medical problems prevented him from timely filing their Virginia income tax return.

DETERMINATION

Financial Disability

Virginia Code § 58.1-301 provides, with certain exceptions, 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. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia . For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income with “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.

Under IRC § 6511, the statute of limitations to claim a federal income tax refund or overpayment credit may be tolled provided the taxpayer can prove he was “financially disabled,” defined as the inability to manage his financial affairs by reason of mental or physical impairment which can be expected to result in death or last longer than 12 months. Virginia's conformity to federal law, however, extends only to the use of the same terms in the IRC as are used in Virginia's tax statutes. Such statutes are separate and distinct from the IRC, and conformity does not automatically import each provision of the IRC into Virginia law. Title 58.1 of the Code of Virginia contains no reference to financially disabled taxpayers generally or to tolling the statute of limitations for such disability.

Instead, Virginia Code § 58.1-341 F provides that an individual who is unable to make a return because of a disability has the responsibility of having such return filed by a fiduciary or duly authorized agent. Thus, Virginia law addresses the requirements of filing returns for taxpayers who have disabilities. While a severe illness or medical condition may be considered a disability for purposes of Va. Code § 58.1-341 F, the statute does not provide for the suspension of the statute of limitations for an individual who is mentally or physically disabled. See Public Document (P.D.) 10-204 (9/2/2010).

Statute of Limitations

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 that:

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.]

Although the Taxpayer has not requested an actual refund, but has requested that an overpayment of tax for the 2012 taxable year be applied against the income tax liability for the 2013 taxable year, the laws regarding refunds apply. As stated above, Va. Code § 58.1-499 requires that an application for refund must be received within three years from the last day prescribed by law for the timely filing of the return. See P.D. 09-88 (5/28/2009).

Virginia Code § 58.1-341 A requires that a taxpayer file an individual income tax return by May 1 of the year following the tax year for which the return is filed. Based on Virginia statutes, the due date for the Taxpayer's 2012 individual income tax return was May 1, 2013. As such, the return was required to be filed by May 2, 2016, in order to credit the overpayment claimed from the 2012 taxable year (May 1, 2016, was on a Sunday).

The original 2012 Virginia income tax return was not filed until January 2017, well after the statute of limitations had expired on May 2, 2016. The provisions of Va. Code § 58.1-499 D are clear and do not provide the Department with any discretion in enforcing the three-year limitations period to apply for a refund or overpayment credit. Accordingly, while I empathize with your circumstances, I cannot approve your request to grant a credit for overpayment of individual income tax for the taxable year ended December 31, 2012.

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/1340.M