Could a taxpayer overturn a 1991 Virginia assessment in 2009 by arguing income-tax filing was voluntary and IRS data was illegal?

Subject

Fifteen-year-late appeal and voluntary-filing arguments did not defeat assessment

Plain-English summary

Virginia upheld the 1991 income-tax assessment because the appeal was filed far too late and the taxpayer's voluntary-tax arguments did not excuse nonfiling. IRS information showed income for 1991, but the taxpayer filed neither a federal nor Virginia return and did not adequately respond to the Department's request.

The assessment was issued April 8, 1994. The taxpayer waited until January 8, 2009 to appeal. Current § 58.1-1821 language quoted in the ruling allowed 90 days, and Virginia's former policy for pre-August 15, 2003 assessments had allowed appeals only within the three-year period for judicial relief. The 2009 filing was outside either window.

The taxpayer also argued that federal and Virginia income taxes had to be voluntary and that filing would force self-incrimination. Virginia answered that the system's reliance on voluntary compliance did not prevent assessment when a taxpayer failed to follow the law. The taxpayer did not deny receiving income.

Finally, the taxpayer offered no objective evidence that the IRS information was incorrect or illegally obtained. The assessment remained payable.

What this means for you

• An otherwise arguable tax position can be lost by missing the administrative appeal deadline.
• "Voluntary compliance" does not mean that filing and payment are optional.
• A challenge to IRS-supplied information needs objective evidence of error or improper acquisition.
• Historical appeal rules should not be assumed to match current procedures.

Common questions

When was the assessment issued?

April 8, 1994.

When did the taxpayer appeal?

January 8, 2009.

Did Virginia accept the self-incrimination argument?

No.

Citations and references

• Va. Code § 58.1-1821.
• 23 VAC 10-20-165.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-58

Original ruling text

May 7, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter concerning the Virginia individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 1991. I apologize for the delay in responding to your letter.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating the Taxpayer had income for the 1991 taxable year. The Taxpayer did not file a federal or Virginia individual income tax return for that taxable year. The Department requested that the Taxpayer file the proper Virginia income tax return or provide an explanation concerning why his income was not taxable. When an adequate response was not received, the Department issued an assessment.

The Taxpayer contends that both the United States and Virginia income taxes must be voluntary in order to not conflict with the United States and Virginia constitutions, and states that he has chosen to not volunteer to witness against himself in a criminal proceeding by filing a tax return. He also states the Department received tax information from the IRS illegally. As such, the Taxpayer requests that the assessment for the 1991 taxable year be abated.

DETERMINATION

Virginia Code § 58.1-1821 states, "Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner." [Emphasis added.] Under Title 23 of the Virginia Administrative Code (VAC) 10-20-165, the 90-day period enumerated in Va. Code § 58.1-1821 begins on the day after the date of assessment and continues for 90 consecutive days, including weekends and holidays.

For assessments issued prior to August 15, 2003, the Department had a policy of accepting administrative appeals at any time within the three-year statute of limitations for pursuing a judicial remedy. In this case, the assessment for the 1991 taxable year was issued to the Taxpayer on April 8, 1994, and appealed by letter dated January 8, 2009. As such, the Taxpayer failed to file a complete administrative appeal with the Department within the limitations period. Therefore, the Taxpayer's application for correction of the 1991 taxable year assessment is barred by the statute of limitations.

Furthermore, the Taxpayer contends that filing federal and Virginia individual income tax returns is voluntary and he has chosen not to volunteer to file. The Taxpayer does not deny receiving income for the taxable year at issue. While the federal and Virginia income tax systems rely on voluntary compliance by taxpayers for payment of the proper amount of taxes, this does not preclude the Department from issuing assessments when a taxpayer does not properly comply with the law.

Finally the Taxpayer claims the Department illegally received tax information from the IRS. The Taxpayer has provided no objective evidence to show that the information from the IRS is incorrect or improperly obtained.

Accordingly, the Virginia income tax assessment issued for the 1991 taxable year is correct and remains due and payable. Payment of the outstanding balance, as shown on the enclosed schedule, should be remitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *. If payment is not received within the allotted time, additional interest will accrue and collection action will resume on the outstanding balance.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department of Taxation's web site. If you have any questions about this determination, please contact * at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-3328419503.E