How should spouses file when they ended their Virginia domiciles on different dates during 2005?

Subject

Taxpayer contends he has domicile in another state and not liable for tax in Virginia

Plain-English summary

Virginia required the spouses to replace their nonresident return with an amended part-year resident return. The Foreign Service officer's family established domicile in another state in May 2005, while he established his own domicile there on July 26, 2005.

Virginia treated each spouse as a domiciliary resident through the date that spouse's Virginia domicile ended. Their 2005 Virginia tax therefore had to be computed on income received while they were Virginia residents, rather than by treating the whole year as nonresident.

The Commissioner directed them to file the amended part-year return, include the required attachments, claim the employer withholding credit, and pay any remaining balance. Collection would resume if they did not file within 30 days.

What this means for you

• A move during the year can require a part-year resident return.
• Spouses may have different domicile-change dates.
• Time spent outside Virginia does not by itself resolve domicile; the ruling used the dates on which the taxpayers established new domiciles.
• Withholding should be claimed on the corrected filing rather than omitted.

Common questions

Did Virginia tax the officer as a resident for all of 2005? No. It treated him as a Virginia domiciliary only through July 26, 2005.

Was the nonresident return sufficient? No. The taxpayers were directed to amend it to a part-year resident return.

Citations and references

• Va. Code § 58.1-302.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-51

Original ruling text

April 30, 2008

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the Virginia individual income tax assessment issued to * (the "Taxpayers") for the taxable year ended December 31, 2005. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer states that he is an officer in the U.S. Foreign Service who generally spends most of his time outside the United States. He states that his employer withheld Virginia income tax from his wages although he was not physically present in Virginia during 2005. His family established a domicile in * ("State A") in May 2005, after which he established his domicile on July 26, 2005, when he established domicile in State A, registered to vote in State A and obtained a State A driver license. The Taxpayer and his spouse filed a joint Virginia nonresident income tax return for the 2005 taxable year, on which they computed their tax due as and for which they claimed no credit for Virginia income tax withheld by his employer.

The Department issued an individual income tax assessment for the 2005 taxable year based on the nonresident income tax return filed by the Taxpayer and his spouse in 2007.

The Taxpayer contends that he was not liable for tax in Virginia after he established domicile in State A, and therefore requests that the assessment be abated.

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1 302. The domiciliary residence of a person means the permanent place of residence of an individual or the place to which he intends to return even though he may actually reside elsewhere. An actual resident of Virginia means an individual who, for an aggregate of more than 183 days of the taxable year, maintains a place of abode within Virginia, whether domiciled in Virginia or not.

The Taxpayers are subject to Virginia individual income taxation as domiciliary residents of Virginia through the dates that their separate domiciles moved to State A. As such, a Virginia part-year resident return should have been filed for the 2005 taxable year on which income tax was computed on their income received as Virginia residents through the end of their domicile in Virginia. Instead, the Taxpayers computed the 2005 tax as nonresidents on an amended Virginia nonresident income tax return.

Accordingly, the Taxpayers must file an amended 2005 part-year resident income tax return to amend the nonresident return to a part-year resident return, following the instructions for filing an amended return on page 4 of the instructions for the 2005 part-year resident return. Credit for payment of employer withholding credit should be reflected on the applicable line of the amended nonresident return filed.

Please submit the amended 2005 Virginia part-year resident income tax return, along with all applicable attachments and payment of the balance due, if any, to: *, Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P. O. Box 27203, Richmond, Virginia 23261-7203. Collection action will resume if the amended return is not filed within 30 days from the date of this letter.

The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. The 2005 Virginia part-year resident individual income tax forms and instructions are also available for download. If you have any questions about this determination, you may contact * at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1419597278E