Could a taxpayer receive the overpayment shown on a June 2018 original 2014 return after Virginia separately refunded payment of a mistaken nonfiler assessment?

Plain-English summary

Virginia assessed a taxpayer who had not filed a 2014 return. She paid the assessment, then filed the actual return in June 2018 showing an overpayment. Virginia learned that her employer had failed to report withholding, refunded the amount she paid on the assessment, but denied the additional overpayment on the return.

The denial stood: the original return was filed after the three-year refund deadline.

Two different refund amounts

The Department corrected and refunded the payment made on the mistaken assessment because the employer-reporting problem had caused the assessment.

The overpayment shown on the taxpayer's return was a separate claim governed by Va. Code § 58.1-499(D). That statute bars refunds not discovered or claimed within three years after the timely-return deadline.

For 2014:

• Return due: May 1, 2015
• Refund deadline: May 1, 2018
• Original return filed: June 18, 2018

The claim arrived after expiration. Because it was an original return, not an amended return, none of Va. Code § 58.1-1823's amended-return exceptions applied.

What this means for you

• Correcting an assessment does not reopen every refund claim. Separate payments may have separate legal bases.
• File an original refund return within three years of its due date. A few weeks late can eliminate the overpayment.
• Amended-return exceptions do not apply to a first-filed return.
• Employer withholding errors can be corrected, but they do not suspend the taxpayer's filing deadline.

Common questions

Q: Why did Virginia refund one amount but not the other?

A: One repaid the mistaken assessment; the other was a late refund claim first shown on the original return.

Q: Was June 18, 2018 close enough to May 1?

A: No. The statute imposed a firm May 1, 2018 deadline.

Q: Could the protective-claim rules save the refund?

A: The ruling found the original-return claim untimely and said the amended-return exceptions did not apply.

Citations and references

• Va. Code § 58.1-499(A), (D) — overpayment refunds and three-year limit
• Va. Code § 58.1-341(A) — individual return due date
• Va. Code § 58.1-1823 — amended-return exceptions

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-57

Original ruling text

May 20, 2019

Re: § 58.1-1824 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, 2014.

FACTS

The Department issued an assessment to the Taxpayer on March 20, 2018, after she failed to file a Virginia individual income tax return for the 2014 taxable year. By April 2018, the assessment had been paid in full. In June 2018, the Taxpayer filed a return for the 2014 taxable year, reporting an overpayment of income tax and requesting a refund.

The Department discovered the Taxpayer’s employer failed to report Virginia income tax it withheld on behalf of its employees. As such, the Department refunded the tax paid by the Taxpayer to satisfy the assessment, but denied the refund of the overpayment reported on the income tax return because the return was filed beyond the refund period allowed by the statute of limitations. The Taxpayer’s letter, which was attached to the return, contends she should receive a refund because she filed a Virginia income tax return.

DETERMINATION

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 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 2014 individual income tax return was May 1, 2015. As such, the return was required to be filed by May 1, 2018, in order to receive a refund for the 2014 taxable year.

The original 2014 Virginia income tax return was not filed until June 18, 2018, after the statute of limitations had expired. Had the Taxpayer not already paid an assessment for the 2014 taxable year and was merely claiming the refund for the first time, the refund claim would not have been timely. In addition, because the Taxpayer was not filing an amended return to claim the refund, none of the exceptions to the three-year statute of limitations found in Virginia Code § 58.1-1823 applied. Accordingly, the refund of the Taxpayer’s overpayment of tax reported on the return filed for the 2014 taxable year cannot be granted.

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/1719.B