The Department's own auditor told me over the phone to go ahead and file an appeal of my old assessments -- does that give me a fresh 90-day window to appeal, even years after the original assessments?

Plain-English summary

A taxpayer had Virginia individual income tax assessments issued between July 2009 and September 2018, for several years in which she hadn't filed returns. She didn't appeal any of them at the time. In May 2021, she contacted the Department, arguing she shouldn't have been assessed because she was a resident of another state (State A); the Department's auditor asked for documentation, reviewed it, but made no adjustments. In June 2022, the auditor told her by phone to either file an appeal or make an offer based on doubtful collectability. She filed an appeal.

Three different limitations periods, all working against her. The Department walked through each possible path to relief:

• Ordinary appeal (Va. Code § 58.1-1821): A complete appeal must be filed within 90 days of the assessment date. The most recent assessment (2015 tax year) was issued September 19, 2018; the appeal wasn't filed until June 2022 -- years too late for every single assessment at issue.
• Protective claim (Va. Code § 58.1-1824): This route lets a taxpayer preserve judicial remedies by filing a refund claim within three years of assessment -- but only if the assessment has actually been paid in full (23 VAC 10-20-190 A 1). The taxpayer hadn't paid anything toward any of the assessments, so this path was never available to her either.
• Reopening via the 2022 auditor conversation: This was the taxpayer's best argument -- that the auditor's June 2022 instruction to "file an appeal" implicitly created a new right to appeal, measured from that conversation. The Department rejected it: an "assessment" is a specific legal determination of tax owed (or a refund denial), and the auditor's casual phone instruction was neither. It wasn't a new assessment and it wasn't a new final determination, so it couldn't restart any appeal clock. In fact, the Department found the auditor had exceeded their own authority by suggesting an appeal was still available at all -- the Department's administrative remedies are strictly bounded by the statutory windows in §§ 58.1-1821 and 58.1-1824, with no informal extension mechanism.

Outcome. All the assessments remained due and payable. Because the taxpayer said paying would create a financial hardship, the Department pointed her toward two non-appeal alternatives: an Offer in Compromise based on doubtful collectibility, or a payment agreement with the Collections Unit.

What this means for you

Anyone who missed the 90-day deadline to appeal an old Virginia tax assessment

Don't count on a later conversation with an auditor -- even one where they tell you to "file an appeal" -- to revive an appeal right that's already expired. Only a genuine new assessment or final determination restarts the clock; an auditor's informal guidance doesn't.

Anyone considering the "protective claim" refund route

Remember it requires you to have actually paid the assessment in full first. If you haven't paid, this path isn't available to you regardless of how much time has passed.

Taxpayers facing old assessments they can't realistically pay

If the appeal window has genuinely closed, an Offer in Compromise (doubtful collectibility) or a Collections Unit payment agreement are the practical paths forward -- not a late-filed appeal.

Common questions

Q: A Department auditor told me to go ahead and file an appeal, even though it's been years since my assessment -- does that give me a new appeal right?
A: Not based on this ruling. Only an actual new assessment or final determination creates a fresh appeal right; an auditor's informal instruction to appeal doesn't, even if it comes from the Department itself.

Q: Can I use the "protective claim" statute to challenge an old assessment I never paid?
A: No. A protective claim under Va. Code § 58.1-1824 requires the assessment to have been paid in full -- if you haven't paid, this route isn't open to you.

Q: What can I do if I owe old assessments I genuinely can't afford to pay?
A: Consider an Offer in Compromise based on doubtful collectibility, or contact the Department's Collections Unit about a payment agreement -- these don't require reopening the merits of the assessment.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-1821 -- 90-day window to apply for administrative relief from an assessment
• Va. Code § 58.1-1820 -- an assessment is deemed made when written notice is mailed to the taxpayer's last known address
• Va. Code § 58.1-1824 -- 3-year protective refund claim, available only if the assessment has been paid in full
• 23 VAC 10-20-190 A 1 -- payment in full is a prerequisite to a protective claim

Prior rulings referenced (described here, not linked): P.D. 86-224 (11/3/1986) -- protective claim requires timely payment and filing; P.D. 15-65 -- cited by the Department (not otherwise described in this letter).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-10

Original ruling text

February 28, 2024

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 assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 2006, 2007, 2010, 2011 and 2015. I apologize for the delay in responding to your appeal.

FACTS

The Department issued assessments to the Taxpayer between July 2009 and September 2018 for failure to file Virginia individual income tax returns. The Taxpayer did not initially appeal the assessments. The Taxpayer subsequently contacted the Department in May 2021 to inquire about the assessments. She stated that she should not have been assessed tax because she was a resident of * (State A). The Department’s auditor requested documentation to substantiate her State A residency and the Taxpayer submitted further information. No adjustments to the assessments were made by the auditor. Instead, in June 2022, the auditor instructed the Taxpayer to file an appeal or make an offer based on doubtful collectability. Pursuant to this instruction, the Taxpayer appealed the assessments, contending that she was a resident of *** (State A).

DETERMINATION

Applicable Statute of Limitations

The Taxpayer’s history of having assessments issued after failing to file returns raises several different issues with respect to statutes of limitations. Each of these limitations periods will be addressed in turn.

Deadlines for Filing Appeals

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 most recent assessment, which was for the 2015 taxable year, was issued on September 19, 2018. The Taxpayer filed the present appeal with the Department by facsimile dated June 15, 2022, well after the 90 day statute of limitations had expired for any of the assessments at issue.

Protective Claim

Virginia Code § 58.1-1824 provides that “[a]ny person who has paid an assessment of taxes administered by the Department of Taxation may preserve his judicial remedies by filing a claim for refund with the Tax Commissioner. . . within three years of the date such tax was assessed.” Virginia Code § 58.1-1824, therefore, expressly limits the right to file a protective claim to cases in which both the filing of the claim and the payment of the assessment occurred within three years of the assessment. See Public Document (P.D.) 86-224 (11/3/1986). In addition, all assessed taxes, penalties, and accrued interest for the year or years subject to the request must be paid in full before a taxpayer may file a protective claim. See 23 VAC 10-20-190 A 1.

To make a protective claim, the last day for payment of any of the assessments at issue was September 19, 2021, three years after the assessment was issued for the 2015 taxable year. No payments, however, have been made towards any of the assessments. As such, the Taxpayer could not appeal her assessments as protective claims under Virginia Code § 58.1-1824.

Reopening Audits

The Department’s auditor instructed the Taxpayer by phone on June 22, 2022, to file an appeal or discuss repayment options. Based on the information provided, if the auditor determined the assessments were in error, they had the authority to adjust the assessments unless prohibited to do so by the statute of limitations. Based on the auditor’s actions, the issue becomes whether the Taxpayer now had another 90 days, or three years if the assessments were paid, in which to file an appeal from the auditor’s June 2022 telephone conversation.

As stated above, Virginia Code § 58.1-1821 and Virginia Code § 58.1-1824 provide an administrative process that allows taxpayers to appeal assessments or make protective claims for refunds. An assessment is a determination of the amount of tax, including additional or omitted tax that is due. See 23 VAC 10-20-165 A. The denial of a refund claim is also deemed to be an assessment. Id. The auditor’s June 2022 instruction to file an appeal was not an assessment or a new final determination that would have created a new right to file an appeal.

Further, because the Department’s administrative remedies are limited to those allowed under Virginia Code § 58.1-1821 and Virginia Code § 58.1-1824, the longest period of time that a matter could have been raised for adjudication through the Department’s appeals process was three years from the date of assessment. As such, the auditor acted outside their authority when they instructed the taxpayer to file an appeal.

CONCLUSION

While the Department encourages the audit staff to resolve tax liability issues in order to preclude taxpayers from having to go through the administrative appeals process, the Department is limited by statutory periods under which a taxpayer can pursue an administrative remedy with the agency.

In deference to these statutory limitations, the assessments issued for taxable years ended December 31, 2006, 2007, 2010, 2011 and 2015 remain due and payable. Accordingly, updated bills will be issued to the Taxpayer, including accrued interest to date. The Taxpayer should remit payment immediately or collections actions will resume.

The Taxpayer indicates that the payment of the assessments will create a financial hardship. If the assessments create a financial hardship, the Taxpayer may pursue an offer in compromise based on doubtful collectability. To begin that process, the Taxpayer should complete the enclosed Individual Offer in Compromise: Doubtful Collectibility form and Financial Statement for Individuals, and include the required fee or fee waiver request. The completed forms and statement will allow the Department to review and analyze the Taxpayer’s financial situation. Upon completion of that review, a response will be issued to the Taxpayer. The Taxpayers also have the option to request a payment agreement with the Department's Collections Unit. The Collections Unit may be contacted at (804) *.

The Code of Virginia sections, regulations 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 (804) ***.

Sincerely,

Craig M. Burns

Tax Commissioner

Enclosure

AR/4288.B

Related Documents

86-224

15-65