Could Virginia refund 2000 and 2001 tax paid in error after the statutory refund deadline expired?

Plain-English summary

Virginia denied the Maryland resident's refund for 2000 and 2001 because the statutory filing period had expired. The ruling said her wage income was exempt from Virginia taxation, but she had filed Virginia nonresident returns and paid tax after her preparer handled the returns incorrectly.

Va. Code § 58.1-1823 generally required an amended refund return by the later of three years from the original due date or one year from a qualifying final federal tax change. Neither period saved these claims.

The Department acknowledged that Maryland also sought tax on the same income, but said the statute contained no exception for the circumstances and gave the Tax Commissioner no authority to extend the deadlines.

What this means for you

• A valid underlying overpayment can still become nonrefundable when the claim deadline expires.
• Preparer error did not extend the statutory period in this ruling.
• Paying another state on the same income did not create an exception.
• Refund deadlines should be tracked separately for each year and state.

Common questions

Did Virginia agree the wages should not have been taxed?

The ruling described the income as exempt under Va. Code § 58.1-342.

Why was the refund still denied?

The amended claims for 2000 and 2001 were filed outside the statutory limitation periods.

Could the Tax Commissioner waive the deadline?

No. The ruling said the Commissioner lacked that authority.

Citations and references

• Va. Code §§ 58.1-342 and 58.1-1823.

Subject

Claim for refund of individual income taxes not timely filed

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-6

Original ruling text

January 15, 2007

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter submitted on behalf of your client, * (the "Taxpayer"), in which you request the Department issue an individual income tax refund for the 2000 and 2001 taxable years.

FACTS

You represent that the Taxpayer is a domiciliary resident of Maryland who worked in Virginia during the 2000 through 2004 taxable years. Virginia individual income tax was withheld from her wages for these taxable years. The Taxpayer filed Virginia nonresident income tax returns and paid tax to Virginia for the 2000 and 2004 taxable years even though the income was exempt from Virginia income taxation pursuant to Va. Code § 58.1-342.

The Taxpayer was contacted by Maryland concerning delinquent income tax returns for several years, including the taxable years that are the subject of this appeal. Upon discovery of the filing error, the Taxpayer filed delinquent resident Maryland income tax returns. The Taxpayer also began the process of filing amended Virginia income tax returns to receive a refund for taxes paid to Virginia in error. Amended Virginia income tax returns were not filed for the 2000 and 2001 taxable years because the statutory period in Va. Code § 58.1-1823 for filing an amended return claiming a refund had expired.

The Taxpayer states that the nonresident Virginia income tax returns were completed incorrectly by her tax preparer, resulting in income tax being paid to Virginia rather than to Maryland. Because she is obligated to pay tax to Maryland on the same income on which tax was paid to Virginia, the Taxpayer requests an exception to the limitations period for claiming a refund of the income tax paid to Virginia.

DETERMINATION

Virginia Code § 58.1-1823 provides, in pertinent part, that an amended return claiming a refund must be filed within the later of (i) three years from the last day prescribed by law for the timely filing of the return; or (ii) one year from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the state tax is based, provided that the refund does not exceed the amount of the decrease in Virginia tax attributable to such federal change or correction. There are no exceptions to these statutory requirements, and the Tax Commissioner is not granted the authority to extend the limitations periods.

The Taxpayer's claim for the refund of individual income taxes paid for the 2000 and 2001 taxable years was not submitted within the limitations periods provided in Va. Code § 58.1-1823. While I appreciate the Taxpayer's situation, I am bound by the clear requirements under the law. Accordingly, I must deny the Taxpayer's request for refund for the 2000 and 2001 taxable years.

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

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-889456505E