Could a taxpayer recover a 1999 overpayment by filing the Virginia return in 2016?

Plain-English summary

Virginia denied a refund claimed on a 1999 resident return filed in August 2016. The general three-year period required a refund return by May 1, 2003.

Most of the estimated assessment had been collected in 2005. Even the separate two-year rule measured from payment expired in October 2007. Because the return missed both periods, Virginia could not refund the claimed excess collection, even if the return reported much less income than the IRS information used for the assessment.

Common questions

Did the late return change the assessment amount? The Department took no refund action because the limitation periods had expired.

Could Virginia waive the deadlines based on the amount collected? No. The ruling says the statutes gave no discretion.

Citations and references

• Va. Code §§ 58.1-499 A and D, 58.1-341 A, and 58.1-1823 A (iv)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-66

Original ruling text

May 2, 2018

Re: § 58.1-1821: Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessment issued to * (the “Taxpayer”) and a refund for taxes paid for the taxable year ended December 31, 1999. I apologize for the delay in responding to your appeal.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating the Taxpayer had income subject to Virginia income tax. At the conclusion of its review, the Department issued an assessment for tax, penalty and interest for the 1999 taxable year. Most of the assessment has been satisfied through collection measures by the Department, but a portion remains outstanding.

In August 2016, the Taxpayer filed a Virginia resident individual income tax return. The Taxpayer reported substantially less federal adjusted gross income (FAGI) than reported by the IRS. The Department took no action because the return was filed beyond the statute of limitations. The Taxpayer filed an appeal, in which he concedes that he filed his return late; however, he requests a refund of the overpayment on the basis that the lien seized considerably more money than what he believes was due.

DETERMINATION

Pursuant to Virginia Code § 58.1-499 A, 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 will 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 . . . .

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 1999 individual income tax return was May 1, 2000. As such, the return was required to be filed by May 1, 2003 in order to receive a refund for the 1999 taxable year. The Taxpayer's 1999 Virginia income tax return was filed August 2016, long after the statute of limitations had expired.

In addition, the general rule is that an amended return must be filed within three years of the original or extended due date, as applicable, to claim a refund. See Virginia Code § 58.1-1823. This code section includes a number of exceptions to the general rule when specific circumstances are present. Specifically, Virginia Code § 58.1-1823 A (iv) grants an individual two years from the date of payment to file an amended return. The Department collected most of the assessment in 2005. Under this provision, the Taxpayer had until October 2007, two years from the date of the last payment, to file an amended return. The Taxpayer filed his return well after this

date.

The Virginia statutes are clear and do not provide the Department with any discretion in enforcing the limitations periods to file an amended return to claim a refund. Accordingly, the Department cannot grant your request for refund of the overpayment of individual income tax for the 1999 taxable year.

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 about this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/845.o