My spouse and I filed a joint Virginia return, then my spouse separately filed a part-year return, and now the Department reclassified my return as married filing separately -- can we fix this back to joint?

Plain-English summary

A married couple filed a joint 2017 Virginia income tax return. Afterward, the wife separately filed her OWN part-year return -- creating two inconsistent filings for the same tax year under the same marriage. Because of that inconsistency, the Department reclassified the husband's original return as married-filing-separately, which reduced his standard deduction and personal exemption amounts (separate filers must split those amounts, per Title 23 VAC 10-110-170), and issued an assessment reflecting the higher tax that resulted.

Virginia lets married couples who file a joint federal return choose either joint or separate filing status for Virginia purposes (Va. Code § 58.1-324). The catch with joint filing is that it requires the ENTIRE income of BOTH spouses to be included in the couple's combined Virginia taxable income for the full year, computed as if both were Virginia residents -- so a couple can't file jointly on one return while also having a spouse's separate part-year return floating around covering some of the same income.

On appeal, the couple resolved the inconsistency by submitting a complete, proper joint return for 2017, which included the wife's full income for the year. Because Virginia's individual income tax system relies on taxpayers' own self-reporting, the Department accepted that this joint submission reflected the couple's actual intent to file jointly for the whole year, and processed the return and adjusted the assessment accordingly (with the standard notice that any FURTHER adjustment would still carry a 90-day appeal window).

What this means for you

Married couples who filed jointly, but where one spouse later files a separate return

Don't file a standalone separate return for part of the year if a joint return has already been filed for that year -- the Department will need to reconcile the inconsistency, likely by reclassifying the original return as separate (with reduced deduction/exemption amounts) until the couple clarifies their actual election, typically by submitting a proper, complete joint return covering both spouses' full-year income.

Couples who want to switch back to joint filing status after an inconsistency-driven reclassification

Submit a COMPLETE joint return -- not just a letter or explanation -- including both spouses' full income for the year, computed as if both were Virginia residents. That's what let this couple fix their filing status and get their assessment recalculated.

Anyone with a part-year-resident spouse filing separately from a joint-filer spouse

Coordinate your filings before submitting. If one spouse's income needs special part-year treatment, decide up front whether the couple is filing jointly (all income combined, full-year computation) or separately (each spouse's own return, split deductions) -- mixing the two approaches across separate filings creates exactly the kind of inconsistency that triggered this assessment.

Subject

Individual Income Tax Return: Filing Status - Married Filing Separate : Deductions and Exemptions

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-118

Original ruling text

September 7, 2021

Re: § 58.1-1821 Appeal: 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”) for the taxable year ended December 31, 2017. I apologize for the delay in responding to your request.

FACTS

The Taxpayers, a husband and wife, filed a joint 2017 Virginia individual income tax return. Subsequently, the wife filed a separate part-year return. As a result, the Department changed the husband’s return to married filing separate status, reduced his standard deduction and exemption amounts accordingly and issued an assessment. The Taxpayer appealed and submitted another 2017 individual income tax return, choosing the married filing a joint return status.

DETERMINATION

Married taxpayers who file a joint federal income tax return may elect to file either a joint return or separate returns to calculate their Virginia individual income tax liability. See Virginia Code § 58.1-324. Married taxpayers who elect to file separate returns must allocate their standard deduction and personal exemption amounts accordingly. See Title 23 of the Virginia Administrative Code (VAC) 10-110-170. Taxpayers who choose to file jointly, however, have their joint Virginia taxable income (VTI) determined as if both were Virginia residents. As a result, the wife’s entire income for the 2017 taxable year must be included in the computation of VTI on the joint full-year return.

The Taxpayers submitted a joint return for the 2017 taxable year along with their appeal. Because of the self-reporting nature of the individual income tax filing system, the Department must assume it was the intent of the parties to file a joint return for the entire 2017 taxable year. As such, the return will be processed and the assessment adjusted accordingly. If the Department makes further adjustments to the return, the Taxpayers will have 90 days from the date of the notification of the any adjustment in which to appeal.

The Code of Virginia sections and regulation cited are available online at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website. 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/3446-C