Was a Virginia individual income tax refund claim for the 2015 tax year timely when the amended Virginia return was filed more than three years after the original return but within one year of a related amended federal return?

Subject

Administration : Statute of Limitations - Refunds

Plain-English summary

A taxpayer filed an amended 2015 Virginia individual income tax return on May 16, 2019, reporting an overpayment and asking for a refund. The Department of Taxation denied the refund, saying the amended return was filed too late under the statute of limitations. The taxpayer appealed, arguing the filing was actually timely because it followed an amended federal return that reported a change in her federal adjusted gross income, and she had filed the Virginia amended return within one year of that federal change.

The Tax Commissioner agreed with the taxpayer and reversed the denial. Under Va. Code § 58.1-311, if the IRS changes or corrects a taxpayer's federal income tax for a year, the taxpayer has one year after the "final determination" of that change to file an amended Virginia return reflecting it. Under 23 VAC 10-20-180 B, a "final determination" includes payment or refund of federal tax. Here, the taxpayer's amended 2015 federal return -- filed March 30, 2019 -- resulted in an IRS refund, and her amended Virginia return followed on May 16, 2019, well within one year of that federal refund. Because the special one-year window tied to the federal change applied, the amended Virginia return was timely, and the Commissioner directed that it be processed and the refund issued.

What this means for you

Taxpayers who amend a federal return after an IRS adjustment

If the IRS changes your federal tax liability for a prior year and you get an amended federal refund or owe additional federal tax, you generally have one year from that "final determination" -- which includes actual payment or refund of the federal tax -- to file an amended Virginia return reflecting the change, even if the normal Virginia refund statute of limitations has otherwise expired. Keep clear records of when you filed the amended federal return and when the related federal refund or payment was finalized, since that date starts the one-year Virginia window.

Accountants and tax preparers

When a refund claim looks time-barred under the general limitations period, check whether it instead falls under the separate one-year rule of Va. Code § 58.1-311 for federal change reporting. That rule can revive an otherwise-late Virginia refund claim if the amended Virginia return was filed within one year of the IRS's final determination on the related federal amendment, as defined by 23 VAC 10-20-180 B.

Anyone appealing a Virginia refund denial

This ruling shows that a Department denial based on a general statute-of-limitations reading is not always the last word -- documenting the timeline between the federal change and the Virginia filing can support an appeal under Va. Code § 58.1-1821.

Common questions

Q: Why did the Department first deny this refund?
A: The Department denied the refund because the amended 2015 Virginia return was filed on May 16, 2019 -- more than three years after the original 2015 return would have been due -- which put it beyond the general refund statute of limitations as the Department initially applied it.

Q: Why did the Commissioner ultimately allow the refund anyway?
A: Because the amended Virginia return was tied to a change in the taxpayer's federal tax reported on an amended federal return. Va. Code § 58.1-311 gives taxpayers one year after the final determination of a federal change to file the corresponding amended Virginia return, and the taxpayer's amended federal return (filed March 30, 2019, resulting in a federal refund) was followed by the amended Virginia return within that one-year window.

Q: What counts as a "final determination" of a federal change?
A: Under 23 VAC 10-20-180 B, a final determination of a change in federal tax liability includes the payment or refund of any federal income tax connected to that change -- not just the initial filing of the amended federal return.

Q: Does this mean any late-filed Virginia refund claim can be saved by an amended federal return?
A: No. This ruling only applies where the Virginia refund claim is genuinely tied to a change in federal tax reported through an amended federal return, and the Virginia amended return is filed within one year of the final determination of that federal change. It is a fact-specific determination, not a general extension of the refund deadline.

Q: Can other taxpayers rely on this ruling for their own refund claims?
A: No. This is an official but fact-specific ruling of the Virginia Tax Commissioner. It resolves this particular taxpayer's appeal based on the facts and law described, and another taxpayer should not assume the same outcome applies without consulting a tax professional about their own situation.

Citations and references

Statutes:

• Va. Code § 58.1-1821 (application for correction of an assessment, the appeal mechanism used here)
• Va. Code § 58.1-311 (one-year window to file an amended Virginia return after a change in federal taxable income)
• 23 VAC 10-20-180 B (defines "final determination" of a federal tax change to include payment or refund of federal tax)

Source

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

Original ruling text

February 23, 2021

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek a refund of individual income tax paid by * (the “Taxpayer”) for the taxable year ended December 31, 2015.

FACTS

The Taxpayer filed an amended 2015 Virginia individual income tax return on May 16, 2019, reporting an overpayment of income tax and requesting a refund. The Department denied the refund because the return was filed beyond the refund period allowed by the statute of limitations. The Taxpayer appeals the Department’s denial, contending the return was timely because she filed an amended federal return reporting a change in federal adjusted gross income within one year of filing the amended Virginia return.

DETERMINATION

Under Virginia Code § 58.1-311, if the amount of any individual taxpayer’s federal income tax reported on a federal income tax return for any taxable year is changed or corrected by the Internal Revenue Service (IRS), the taxpayer shall file an amended return reporting such change in federal taxable income within one year after the final determination of such change. Under Title 23 of the Virginia Administrative Code (VAC) 10-20-180 B, a final determination of a change in liability for federal tax includes payment or refund of any federal income tax.

The Taxpayer has provided documentation that shows an amended federal income tax return for the 2015 taxable year was filed on March 30, 2019, which resulted in the payment of a refund from the IRS. The Taxpayer’s 2015 amended Virginia return was filed on May 16, 2019, which was within one year of the filing of the amended federal return. Accordingly, the amended return should be processed as filed and the refund issued as appropriate.

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/3365.A