Could an individual challenge Virginia's 2008-2009 estimated income-tax assessments after the 90-day appeal deadlines?

Plain-English summary

Virginia barred both administrative appeals because they were filed after the 90-day statutory deadlines. The 2008 assessment was issued January 4, 2012, making the appeal due April 4, 2012; the taxpayer did not appeal until April 11, 2013. The 2009 assessment was issued August 29, 2012, making the appeal due November 27, 2012; that appeal was filed June 3, 2013.

The Department had received IRS information showing tax documents sent to the taxpayer at a Virginia address. When the taxpayer did not answer requests for more information, Virginia treated him as a resident and estimated the liabilities from the best information available. The taxpayer later claimed residence in another state, but the late applications could not be considered under the ordinary appeal procedure.

Virginia still allowed 30 days to file 2008 and 2009 returns that more accurately reflected the liability. If filed, the returns would be processed and the assessments adjusted. If not, the estimated assessments would be treated as correct and collection would resume.

What this means for you

• Count the 90-day appeal period from each assessment date.
• A late merits argument does not extend the statutory filing deadline.
• Ignoring residency or income-information requests can lead to an estimated assessment.
• Filing accurate returns may adjust an estimate even when the administrative appeal itself is barred, if the Department permits it.

Common questions

Q: How late were the appeals?
A: The 2008 appeal came more than a year after its deadline; the 2009 appeal came more than six months after its deadline.

Q: Did Virginia decide whether the taxpayer truly lived in the other state?
A: No. The ordinary appeals were time-barred, and the ruling instead requested returns to establish a more accurate liability.

Q: Were the estimated amounts automatically final?
A: Not immediately. The taxpayer received 30 days to file returns for adjustment; otherwise the estimates would stand.

Citations and references

• Va. Code §§ 58.1-111, 58.1-205, 58.1-1821, and 58.1-1826.
• 23 VAC 10-20-165.

Subject

Statute of Limitations. Persons subject to file income tax

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-142

Original ruling text

July 22, 2013

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 assessments issued to * (the "Taxpayer") for the taxable years ended December 31, 2008 and 2009.

FACTS

The Department received information from the Internal Revenue Service (IRS) that tax documents for the 2008 and 2009 taxable years were sent to the Taxpayer at a Virginia address. The Department requested additional information from the Taxpayer in order to determine if his income was subject to Virginia income tax. When the Taxpayer did not respond to the information requests, the Department concluded that the Taxpayer was a resident of Virginia and issued assessments. The Taxpayer appeals the assessments, contending he was a resident of * (State A) during the taxable years at issue.

DETERMINATION

Appeal — Statute of Limitations

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. Such application shall be in the form prescribed by the Department and shall fully set forth the grounds upon which the taxpayer relies and all facts relevant to the taxpayer's contention." Pursuant to Va. Code § 58.1-1821 and Title 23 of the Virginia Administrative Code 10-20-165, a complete appeal must be filed with the Tax Commissioner within 90 days from the date of assessment.

In this case, the Department issued the assessment to the Taxpayer for the 2008 taxable year on January 4, 2012. Based on the provisions of Va. Code § 58.1-1821, the Taxpayer was required to file a complete administrative appeal for this assessment by April 4, 2012. The Taxpayer did not file his appeal for the 2008 assessment until April 11, 2013.

For the 2009 taxable year, the Department issued the assessment on August 29, 2012. The deadline for filing an appeal pursuant to Va. Code § 58.1-1821 for this assessment was November 27, 2012. The Taxpayer's appeal of the 2009 assessment was filed on June 3, 2013.

Both appeals were submitted well after the expiration of the 90-day limitations period. Therefore, the Taxpayer's applications for correction pursuant to Va. Code § 58.1-1821 are barred by the statute of limitations.

Assessments Based on Available Information

The assessments at issue were made based on the best information available to the Department pursuant to Va. Code § 58.1-111. Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia. Further, Va. Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the assessment was attributable to a taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.

The Taxpayer may have additional information that more accurately reflects his Virginia taxable income. Accordingly, the Taxpayer is hereby requested to file Virginia income tax returns for the 2008 and 2009 taxable years to more accurately reflect his Virginia income tax liability.

The Taxpayer should file the requested returns within 30 days of the date of this letter. Please send the return and payment for the corresponding liability to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23218-7203, Attention: *. Once the returns are received, they will be processed and the assessments will be adjusted accordingly. If such returns are not filed within the allotted time, the assessments will be considered to be correct as issued and collection action will resume.

The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5386247659.B