Could a nonresident recover Virginia income tax withheld from 2014 wages when the first refund claim was filed after the three-year deadline?

Plain-English summary

Virginia denied a refund of 2014 income tax withheld from wages because the taxpayer did not file a refund claim within three years of the original return due date.

The Department eventually determined that the taxpayer was not a Virginia resident for 2014 and abated an assessment. But the separate claim to recover 2014 wage withholding was still subject to the refund deadline.

The 2014 return was due May 1, 2015, so a Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S), or another written refund claim, had to be filed by May 1, 2018. The taxpayer filed a resident return in April 2019 and an amended nonresident return claiming the refund in November 2019. Both dates were too late.

The taxpayer's lack of awareness of the limitation period did not excuse the late claim.

What this means for you

A later residency determination does not remove the statutory deadline for claiming withheld Virginia tax. A person with Virginia withholding but no Virginia liability should file Form 763-S or another proper claim within three years of the original return due date.

Common questions

What was the refund deadline for 2014? May 1, 2018.

Which form could a nonresident use to claim withheld tax? Form 763-S.

Did abating the residency assessment automatically preserve the withholding refund? No.

Did ignorance of the deadline extend it? No.

Citations and references

• Va. Code § 58.1-499 A and D — overpayment refunds and the three-year limitation period.
• Va. Code § 58.1-341 A — May 1 filing deadline used to calculate the refund period.
• Brown v. Armistead, 27 Va. 594, 601 (1828), and P.D. 17-211, cited for the rule that ignorance of law does not avoid legal consequences.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-104

Original ruling text

June 16, 2020

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, 2014.

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 for the 2014 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. When no response was received, an assessment was issued.

In April 2019, the Taxpayer filed a Virginia resident return showing a tax due and a new assessment was issued based off that return. Eventually, the Department determined that the Taxpayer was not a resident of Virginia for the 2014 taxable year. As a result, the assessment was abated and a refund issued for a refund from another taxable year that had been applied towards the assessment. The Taxpayer then filed an amended return in November 2019 to change his filing status to nonresident and claim a refund of Virginia income tax withheld from his wages in 2014. The Department denied the refund because the statute of limitations on claiming a refund had expired. The Taxpayer appeals, contending he was unaware of the law.

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 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 . . . [Emphasis added.]

In cases where a taxpayer has had Virginia income tax withheld but does not have a Virginia income tax liability for the year in question, the taxpayer may file a Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S) for a refund. In such cases, the Form 763-S functions as the taxpayer’s return for the year in question. 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.

If the Taxpayer wished to claim a refund for the Virginia income tax withheld for the 2014 taxable year, he had to file the Form 763-S or otherwise make the claim by May 1, 2018, three years from the original due date. The Taxpayer, however, made no claim for refund on a Form 763-S or otherwise until he filed the amended nonresident return in November 2019. Even if his original resident return had made a refund claim, it was not filed until April 2019. In either case, the statute of limitations had already expired.

In addition, the Supreme Court of Virginia has long accepted the principle that individuals may not avoid the legal consequences of their actions by pleading ignorance of the law. See Brown v. Armistead , 27 Va. 594, 601, 1828 Va. LEXIS 43 (1828). The Taxpayer, therefore, could not avoid the application of the statute of limitations by being unaware of it. See Public Document (P.D.) 17-211 (12/19/2017). Accordingly, your request for refund of the overpayment of individual income tax for the taxable year ended December 31, 2014, cannot be granted.

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/3382.M

Related Documents

17-211