Could alleged oral advice that a taxpayer had five years to file preserve a late 2012 Virginia refund claim?

Subject

Statute of Limitations, Refunds, Written Advice

Plain-English summary

Virginia denied a refund shown on a 2012 return filed in December 2016 because the three-year refund period had expired on May 2, 2016.

The taxpayer said a Department representative had orally advised in 2013 that he had five years to file. There was no record or written evidence of that advice. More importantly, Va. Code § 58.1-1835 authorizes relief for an assessment attributable to erroneous written Department advice; it does not apply to refund claims.

The automatic six-month extension did not lengthen the refund period because the taxpayer did not file by the extended due date, so the deadline reverted to three years from the original due date.

Citations and references

• Va. Code § 58.1-499(A), (D).
• Va. Code §§ 58.1-341 and 58.1-344.
• Va. Code § 58.1-1835.
• P.D. 10-238.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-204

Original ruling text

December 13, 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 “Taxpayer”) for the taxable year ended December 31, 2012.

FACTS

The Taxpayer filed a 2012 Virginia individual income tax return in December 2016, reporting an overpayment of income tax and requesting a refund. The Department denied the refund because the return was filed beyond the refund period allowed by the statute of limitations. The Taxpayer appeals the Department's denial, contending he was advised in October 2013 by a representative of the Department that he had five years to file the return.

DETERMINATION

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:

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 Virginia 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 Public Document (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 Virginia 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.

In this case, the Taxpayer's original 2012 income tax return was filed beyond the extended due date for the 2012 taxable year. As such, the Taxpayer had three years from the original due date, May 1, 2013, in which to file a timely request for refund. The statute of limitations for filing a return claiming a refund for the 2012 taxable year expired the day after May 2, 2016 (May 1, 2016, was on a Sunday). The Taxpayer filed his original 2012 return in December 2016, after the applicable statute of limitations had expired.

Written Advice

The Taxpayer contends that a representative of the Department informed him in October 2013 that he had five years to file the return. Virginia Code § 58.1-1835 authorizes the Tax Commissioner to abate an assessment or a portion of an assessment that is attributable to erroneous advice furnished to the taxpayer in writing by an employee of the Department acting in his official capacity. In this case, there is no record of the conversation the Taxpayer refers to or evidence that the advice was provided in writing. Regardless, Virginia Code § 58.1-1835 does not apply to refund claims. Accordingly, there is no basis for relief under Virginia Code § 58.1-1835.

The provisions of Virginia 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. Accordingly, the Taxpayer's refund request for the 2012 taxable year must be denied.

The Code of Virginia sections 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/1449.M