Did Virginia's automatic six-month extension preserve a 2008 refund when the taxpayers did not file the original return until October 2012?

Subject

Late original return negated extension and barred refund

Plain-English summary

Virginia denied the refund because the taxpayers did not file their original 2008 return until October 2012. The automatic six-month extension did not preserve the claim after they also missed the extended filing deadline.

Virginia's extension required the individual to file within the extended period and pay the properly estimated balance by the original due date. If no original return was filed by the extended due date, the extension election was negated and the last timely-filing date reverted to the original May 1, 2009 due date.

The taxpayers therefore had three years from May 1, 2009 to submit the refund claim. The ruling states that the limitation period expired just after May 1, 2012. Their October 2012 original return arrived too late, so the refund was denied.

What this means for you

• A filing extension is not indefinite; the original return still must be filed within the extended period.
• Missing the extended deadline can cause the refund clock to be measured from the original due date.
• A return showing an overpayment does not authorize a refund after the statutory claim period expires.
• Preserve proof of both filing and any extension-related payment.

Citations and references

• Va. Code §§ 58.1-499 A and D, 58.1-341 A, and 58.1-344.
• P.D. 10-238, discussed in the ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-123

Original ruling text

July 25, 2014

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you appeal the Department's denial of a refund claimed by * (the "Taxpayers") on their individual income tax return for the taxable year ended December 31, 2008.

FACTS

The Taxpayers filed their original Virginia return for the 2008 taxable year in October 2012. The Department denied the refund because the return was filed outside the statute of limitations. The Taxpayers filed an appeal, contending the return was filed within three years from the extended due date.

DETERMINATION

Virginia Code § 58.1-499 A provides that in the case of any overpayment of any tax, whether by reason of excessive withholding, overestimating and overpaying estimated tax, or error on the part of the taxpayer, the Tax Commissioner shall order a refund of the overpayment. Virginia Code § 58.1-499 D specifies, however, in pertinent part:

No refund under this section . . . shall be made . . . whether, on discovery by the Department or on written application of the taxpayer, if such discovery is not made or such written application is not received within three years from the last day prescribed by law for the timely filing of the return . . . . [Emphasis added.]

Virginia Code § 58.1-341 A requires that taxpayers file individual income tax returns by May 1 of the year following the tax year for which the return is filed. Virginia Code § 58.1-344 provides an automatic six-month filing extension of the due date for filing the income tax return provided an individual (i) files a return within the extended period, and (ii) on or before the original due date for the filing of the return, pays the full amount properly estimated as the balance of the tax due for the taxable year. If the individual intends to take the extension but then does not file a return or pay the full amount of the tax due by the extended due date, the taxpayer is treated as if no extension had been granted. See Public Document (P.D.) 10-238 (9/30/2010).

When an original return has been filed after the extended due date, the taxpayer has from three years after the original due date to file an amended return. This is because Va. Code § 58.1-344 A permits an individual to elect "an extension of time within which to file the income tax return . . . ." If a taxpayer has not filed an original return by the extended due date, a valid election to extend the due date has not been made. In such cases, the extension is negated and the last day allowed for the timely filing of the return reverts to the original due date of such return.

The Department's records indicate that the Taxpayers' original 2008 income tax return was filed in October 2012, well beyond the extended due date for the 2008 taxable year. As such, the last day prescribed by law for the Taxpayers to file their return reverted to May 1, 2009. The Taxpayers had three years from this date to file a timely request for refund. The statute of limitations for filing a return claiming a refund for the 2008 taxable year expired the day after May 1, 2012, and the Taxpayers filed their original 2008 return after the applicable statute of limitations had expired. Accordingly, the Taxpayers' request for a refund of income tax paid for the 2008 taxable year is denied.

The Code of Virginia sections and public document 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 determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M .Burns

Tax Commissioner

AR/1-5464455649.D