Could taxpayers overturn a 2015 Virginia assessment by saying they filed and paid when the records they cited related to 2014?

Plain-English summary

Virginia upheld an estimated 2015 assessment because the married taxpayers did not provide a 2015 resident return or proof of payment. They said they had filed and paid on May 1, 2015, but that date corresponded to the 2014 return; the 2015 return was not due until May 1, 2016.

The Department could estimate tax from information in its possession when a required return was missing. Its assessment was presumed correct, and the taxpayers had the burden to prove both filing and payment.

Virginia still allowed a practical correction. The taxpayers had 30 days to submit their 2015 resident return, after which the assessment could be adjusted to their actual liability. Without a timely return, the existing assessment would remain correct and collection could follow.

Common questions

Why did the cited May 2015 payment not prove the 2015 filing? It would have applied to the 2014 taxable year.

Could Virginia estimate the tax? Yes. State law allowed an assessment from the best information available.

Was the amount permanently fixed? Not if the taxpayers filed an accurate 2015 return within the allowed 30 days.

Citations and references

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

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-176

Original ruling text

October 24, 2018

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 “Taxpayers”) for the taxable year ended December 31, 2015.

FACTS

The Department obtained information indicating the Taxpayers may have been required to file a Virginia individual income tax return for the 2015 taxable year. The Department requested information from the Taxpayers to verify whether they were subject to Virginia income tax. When an adequate response was not received, the Department issued an assessment for 2015 taxable year based on information available. The Taxpayers appeal the assessment, contending they filed a Virginia income tax return and paid the tax due.

DETERMINATION

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 Virginia 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.

The Department’s records indicate that the Taxpayers did not file a Virginia return, or pay any tax for the 2015 taxable year. The Taxpayer asserts he filed a return with a payment on May 1, 2015. This return and payment, however, would have been for the 2014 taxable year. Virginia individual income tax returns for the 2015 taxable year were due on May 1, 2016.

Virginia 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 Internal Revenue Service (IRS) that will enable the Department to determine the resident’s tax liability.

By letter dated June 7, 2018, the Department requested that the Taxpayers provide a copy of their 2015 Virginia individual income tax return and proof of payment. To date, the Taxpayers have not provided the requested information.

Pursuant to Virginia Code § 58.1-205, any assessment of tax by the Department is deemed prima facie correct. As such, the burden of proof is on the Taxpayers to show the assessment is erroneous and that they filed an income tax return for the taxable year at issue and paid the appropriate tax. Furthermore, Virginia 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 attributable to the taxpayer’s willful failure or refusal to provide the Department with necessary information as required by law.

As indicated above, the assessment for the 2015 taxable year was made based on the best information available pursuant to Virginia Code § 58.1-111. Because the Taxpayers were required to file a Virginia income tax return, the Department was correct in making the assessment. The Taxpayers, however, may have information that better represents their Virginia income tax liability for the taxable year at issue. Therefore, they should file their 2015 Virginia resident income tax return to reflect more accurately their Virginia tax liability.

The return 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 return will be processed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment for the 2015 taxable year will be considered correct as issued and collection actions may result.

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/1671.B