Would Virginia postpone a 2015 resident income-tax assessment while the taxpayer worked on amending and resolving the federal return?

Plain-English summary

A Virginia resident delayed filing a 2015 state return while working with an accountant on federal amendments. Virginia assessed from IRS information.

The federal dispute did not suspend the Virginia filing obligation or assessment. The taxpayer still had 30 days to submit a state return that could support an adjustment.

Why Virginia proceeded

Va. Code § 58.1-341 generally requires a resident who must file federally to file in Virginia, subject to the state filing threshold rules. When no proper state return is filed, Virginia may assess from the best information available, including IRS information authorized for state tax administration.

The Department would not wait for the federal liability to be resolved before maintaining its assessment.

What this means for you

• Do not assume a pending federal amendment postpones Virginia filing.
• File the Virginia return using the best supportable information available.
• If later facts change the liability, provide them through the proper state process.
• Respond within the stated deadline to prevent collection from resuming.

Common questions

Q: Did Virginia refuse to consider a taxpayer-filed return?

A: No. It allowed 30 days for a 2015 resident return and promised review and adjustment as appropriate.

Q: Could Virginia use IRS information?

A: Yes. The ruling cites federal authority permitting IRS information sharing for state tax administration.

Citations and references

• Va. Code §§ 58.1-341, 58.1-321 — resident filing rules
• Va. Code §§ 58.1-312(A), 58.1-111 — assessment authority
• IRC § 6103(d) — state access to federal tax information

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-34

Original ruling text

April 17, 2019

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, 2015.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return and pay Virginia income tax for the taxable year at issue. The Taxpayer indicated that he would file a Virginia return once his federal tax liability was resolved. When the Taxpayer was unable to provide documentation of a resolution, the Department issued assessments based on the IRS information. The Taxpayer filed an appeal, contending he is in the process of working with his accountant to amend his federal return.

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.

When a resident does not file a proper Virginia income tax return, Virginia Code § 58.1-312 A allows the Department to assess underreported tax at any time when a taxpayer fails to file a return or files a false or fraudulent return with the intent to evade tax. Internal Revenue Code (IRC) § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine a resident’s tax liability. The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Department will not hold the assessment in abeyance pending the resolution of the Taxpayer’s federal tax liability.

Because the Taxpayer may have information that better represents his Virginia income tax liability for the taxable year at issue, he should file a 2015 Virginia resident income tax return within 30 days from the date of this letter. The return should be submitted 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 reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct and collection action may resume.

The Code of Virginia sections and regulation 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

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