Could Virginia refund an overpayment claimed on a 2002 individual income tax return filed after the three-year refund deadline?

Subject

Department enforcing the three-year limitations period to apply for a refund

Plain-English summary

A married Virginia couple filed their 2002 individual income tax return in June 2006 and claimed a refund. The Department denied the claim because the return arrived after the statutory refund period.

Va. Code § 58.1-499 A generally directs the Tax Commissioner to refund tax overpayments. Subsection D limits that authority: the Department must discover the overpayment, or receive the taxpayer's written refund application, within three years from the last day prescribed for timely filing the return.

The couple's 2002 return was due May 1, 2003, making May 1, 2006 the refund deadline. Their June filing was late. Although the Commissioner expressed sympathy, he concluded that the statute was clear and gave the Department no discretion to allow the refund.

What this means for you

• A genuine overpayment does not preserve a Virginia refund indefinitely; the claim must be filed within the statutory period.
• For this return, the three-year period ran from the last day prescribed for timely filing, not from when the taxpayers later learned of or filed the claim.
• Filing even shortly after the deadline can eliminate the refund when no statutory exception applies.

Citations and references

• Va. Code § 58.1-499 A, refunds of tax overpayments.
• Va. Code § 58.1-499 D, three-year deadline for Department discovery or a written taxpayer refund application.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-49

Original ruling text

April 26, 2007

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you appeal the Department's denial of a refund claimed on an individual income tax return filed by * (the "Taxpayers") for the 2002 taxable year.

FACTS

The Taxpayers, a husband and wife, are Virginia residents. The Department received information from the Internal Revenue Service indicating that the husband had income for the 2003 taxable year. The Department sent a letter to the husband in May 2006 requesting that he file the proper Virginia individual income tax return or provide an explanation concerning why the income was not taxable.

In June 2006, the Taxpayers filed an individual income tax return for the 2003 taxable year and paid the balance due. They also filed a return for the 2002 taxable year claiming a refund. The Department disallowed the Taxpayers' refund claim for the 2002 taxable year because the tax return was filed after expiration of the statute of limitations.

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 Tax Commissioner 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 . . .

The due date for the Taxpayers' 2002 individual income tax return was May 1, 2003. As such, a return was required to be filed by May 1, 2006, in order to receive a refund for the 2002 taxable year. The Taxpayers' 2002 return was not filed until June 2006. While I sympathize with the Taxpayers' situation, the provisions of Va. Code § 58.1-499 D are clear and do not provide the Department with any discretion in enforcing the three-year limitations period to apply for a refund. Accordingly, I have no choice but to deny the Taxpayers' request for an income tax refund for the 2002 taxable year.

The Code of Virginia sections cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Department's Office of Policy and Administration, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1029175936E