Could a Virginia resident defeat a 2007 nonfiler assessment by showing only that she filed a federal return?

Subject

Virginia requires every resident to file a state income tax return

Plain-English summary

Virginia upheld the assessment because the resident had not filed a Virginia return. IRS information showed 2007 tax documents sent to her Virginia address. After she did not provide a requested Virginia return and Forms W-2, the Department issued an assessment.

The taxpayer supplied a federal transcript and said she had filed federally. Virginia did not dispute that. But the ruling explained that a Virginia resident required to file a federal return generally must also file a Virginia return unless a state filing exemption applies. The federal filing did not replace the state return.

The Tax Commissioner gave her one final 30-day opportunity to submit the requested Virginia return. If she did not file or pay within that period, the assessment would remain and collection would resume. The published source does not report the later result.

What this means for you

• A federal return does not itself satisfy Virginia's separate filing requirement.
• Respond to state nonfiler notices with the requested state return and wage documents.
• Virginia may use IRS information to estimate a resident's liability.
• Filing exemptions depend on the applicable year's Virginia rules and facts.

Citations and references

• IRC § 6103(d).
• Va. Code §§ 58.1-301, 58.1-321, 58.1-322, and 58.1-341.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-85

Original ruling text

June 2, 2011

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2007.

FACTS

The Department received information from the Internal Revenue Service (IRS) that tax documents for the 2007 taxable year were sent to the Taxpayer at a Virginia address. According to the Department's records, the Taxpayer had not filed a Virginia individual income tax return for 2007. The Department requested a copy of the Taxpayer's Virginia individual income tax return and federal Form W-2s to determine her Virginia taxable income. When the Taxpayer did not respond to the information requests, the Department issued an assessment to the Taxpayer. The Taxpayer appeals the assessment and has provided a copy of the federal transcript for the year at issue with her appeal.

DETERMINATION

Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code unless a different meaning is clearly required. For individual income tax purposes, Virginia conforms to federal law in that it starts the computation of Virginia taxable income with FAGI. Income included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it its specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.

Virginia Code § 58.1-341 provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Va. Code § 58.1-321. When a resident does not file a Virginia income tax return, § 6103(d) of the Internal Revenue Code authorizes the Department to obtain information from the IRS that will help in determining the resident's tax liability.

In this case, the Taxpayer asserts that she filed a federal income tax return for the 2007 taxable year. While the Department does not dispute that the Taxpayer filed her federal income tax return, Virginia requires every resident to file a state income tax return. By letters dated August 9, 2010 and February 14, 2011, the Department requested the Taxpayer to file a 2007 Virginia income tax return. To date, no return has been filed. Accordingly, the assessment must be upheld.

I will, however, grant the Taxpayer one more opportunity to provide the information requested. The documentation must be furnished within 30 days from the date of this letter. Otherwise, the Taxpayer should remit payment of the assessed tax and interest within 30 days to avoid the accrual of additional interest. Please send the requested information or payment to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *. If the return is not filed or payment received within the time permitted, the assessment for the 2007 taxable year will be upheld and collection action will resume.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4615646113.D