When is a Virginia income-tax appeal timely and complete, and may a taxpayer appeal while the audit is still being completed?

Plain-English summary

A Virginia resident appealed income-tax assessments after an audit reduced her claimed itemized deductions. The ruling explains three separate procedural requirements: timeliness, completeness, and a finished audit.

First, Va. Code § 58.1-1821 requires a complete appeal within 90 days of the assessment. An assessment is made when written notice is mailed to the taxpayer's last known address under Va. Code § 58.1-1820. These assessments were issued June 6, 2019, but the appeal was postmarked September 24 -- more than 90 days later.

Second, the taxpayer's letter merely said she wanted to appeal because she was unaware of the situation. That was not a complete appeal under 23 VAC 10-20-165. A complete filing must describe the alleged assessment errors, the grounds for the taxpayer's position, the relevant facts, and the controlling legal authority so the Tax Commissioner can make an informed decision.

Third, the auditor had asked for more documentation and the audit remained ongoing. The Department therefore returned the case to the auditor. After the audit was completed, the taxpayer could file an appeal under Va. Code § 58.1-1821 if she disagreed with the final adjustments.

What this means for you

Calendar the 90-day deadline from the assessment notice

The clock runs from the date the assessment is mailed, not from when the taxpayer later focuses on the dispute.

State the actual errors and legal grounds

A bare request for review is not enough. Identify each disputed adjustment, the facts supporting your position, and the authority you rely on.

Finish the audit record first

When the auditor is still requesting substantiation, respond promptly. The Department may decline to hear the appeal until field audit work is complete.

Common questions

Why was the September 24 appeal late? The assessments were issued June 6, more than 90 days earlier.

What made the letter incomplete? It did not describe the alleged errors, grounds, relevant facts, or controlling authority; it only said the taxpayer was unaware of the situation.

Could the taxpayer appeal later? The ruling said she could appeal after the audit was completed if she disagreed with the adjustments, subject to Va. Code § 58.1-1821.

Citations and references

• Va. Code § 58.1-1821 -- 90-day deadline and required grounds and facts.
• Va. Code § 58.1-1820 -- assessment is made when written notice is mailed to the last known address.
• 23 VAC 10-20-165 A and D -- elements of a complete administrative appeal.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-61

Original ruling text

April 21, 2020

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your correspondence in which you contest the individual income tax assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 2016 and 2017.

FACTS

The Taxpayer filed Virginia resident income tax returns for the 2016 and 2017 taxable years. The Department audited the Taxpayer and requested additional information to substantiate various itemized deductions she claimed. The auditor adjusted the amount of the itemized deductions allowed on the returns and issued assessments. The Taxpayer appeals, contending she was unaware of the situation.

DETERMINATION

Statute of Limitations

Virginia Code § 58.1-1821 states, “Any person assessed with any tax administered by the Department of Taxation may, within 90 days from the date of such assessment, apply for relief to the Tax Commissioner. Such application shall be in the form prescribed by the Department and shall fully set forth the grounds upon which the taxpayer relies and all facts relevant to the taxpayers contention.” Pursuant to Virginia Code § 58.1-1821 and Title 23 of the Virginia Administrative Code (VAC) 10-20-165, a complete appeal must be filed with the Department within 90 days from the date of assessment. In addition, Virginia Code § 58.1-1820 provides that assessments made by the Department are deemed to be made when a written notice of assessment is mailed to a taxpayer at her last known address. The assessments for both taxable years were issued on June 6, 2019. The Taxpayer’s appeal was postmarked on September 24, 2019, more than 90 days after the date of the assessments.

On November 21, 2019, the auditor solicited additional documentation from the Taxpayer. Because the audit remains ongoing, the assessment is not eligible for appeal. The Taxpayer should send the information requested by the auditor as soon as possible.

Appeal Requirements

Title 23 of the Virginia Administrative Code (VAC) 10-20-165 A defines a complete appeal as “an administrative appeal containing sufficient information as prescribed in subsection D of this section, so that the grounds upon which the taxpayer relies in contesting an assessment are fully set forth to allow the Tax Commissioner to make an informed final determination.” A complete appeal contains a statement describing the alleged errors in the assessment, the grounds upon which the taxpayer relies, all facts relevant to the taxpayer’s contention and controlling legal authority upon which the taxpayer’s position is based. The Taxpayer’s letter in which she merely requested an appeal because she was unaware of the situation would not be sufficient to be considered a complete appeal in accordance with the requirements of Title 10-20-165 A.

CONCLUSION

This case will be returned to the auditor in order for the audit to be completed. Once the audit has been completed, the Taxpayer may file an appeal in accordance with Virginia Code § 58.1-1821 if she disagrees with any adjustments.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/2180.B