Could a corporation abate a late-filing assessment by proving its return was postmarked on the extended due date?

Subject

Taxpayer has provided evidence that the 2004 return was timely filed

Plain-English summary

Virginia abated the corporate assessment because the taxpayer proved its return was postmarked on the extended due date. Department records had initially shown that the return arrived late, producing a late-filing penalty, an estimated-tax addition, and interest.

The corporation supplied evidence of a February 15, 2006 postmark. Because that was the granted extended filing deadline, Va. Code § 58.1-9 treated the return as timely filed.

The Commissioner also found that the corporation had timely paid its income-tax liability, extension penalty, and underpayment-of-estimated-tax addition. With the late-filing premise removed, the assessment at issue was abated.

What this means for you

• Keep proof of the mailing date when filing a paper return near a deadline.
• An official postmark can establish timely filing even when Department records show later receipt.
• Abating an erroneous late-filing assessment does not erase properly owed extension or estimated-tax charges; here the corporation had already paid those amounts.

Common questions

Was the corporation excused from all penalties? No. The ruling says it had paid the extension penalty and estimated-tax addition; the assessment caused by the supposed late filing was abated.

What evidence changed the result? Proof that the return was postmarked February 15, 2006.

Citations and references

• Va. Code §§ 58.1-450, 58.1-9, and 58.1-504.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-52

Original ruling text

April 30, 2008

Re: § 58.1-1821 Application: Corporate Income Tax

Dear *:

This is in response to your correspondence in which you request abatement of a late payment penalty and addition to tax included in the corporate income tax assessment issued to * (the "Taxpayer"), for the taxable year ended April 30, 2005. I apologize for the delay in responding to your correspondence.

FACTS

The Taxpayer filed a corporate income tax return for the 2004 taxable year and remitted payment of the balance due reflected on the return. The payment included an addition to tax for the underpayment of estimated tax and an extension penalty. The Department previously granted an extension of time to file the return through February 15, 2006.

The Department determined that the Taxpayer filed the corporate return after expiration of the filing extension previously granted. An assessment was issued for late filing penalty, the addition to tax for underpayment of estimated income tax, and accrued interest.

The Taxpayer maintains that the corporate return was timely filed. Further, the Taxpayer contends that the addition to tax was improperly computed and failed to credit an overpayment from a prior period to 2004 estimated payments. The Taxpayer requests correction of the Department's records and abatement of the assessment.

DETERMINATION

Pursuant to Va. Code § 58.1-450, when a corporation fails to timely file an income tax return, a penalty is assessed on the tax due with the return at a rate of 6% per month or fraction thereof, from the due date of the return, including extensions, until the date the return is filed.

The Department's records indicate that the return was filed beyond the extended due date. However, the Taxpayer has provided evidence that the 2004 return was postmarked February 15, 2006. Pursuant to Va. Code § 58.1-9, the corporate return was timely filed.

Virginia Code § 58.1-504 provides for an "addition to tax" (commonly called the "underpayment penalty") in the event of an underpayment of estimated tax. The Department applied the Taxpayer's payment with its original return to tax first, and then to the late filing penalty. Thus, the underpayment penalty was assessed with the late filing penalty. Based on the information provided, the Taxpayer timely filed and paid its corporate income tax liability, extension penalty and underpayment penalty for the 2004 taxable year. Accordingly, the assessment at issue will be abated.

The Code of Virginia sections cited 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 letter, please contact * in the Office of Policy and Administration, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1100969746E