Did paying by the original due date preserve Virginia's six-month extension when the original 2010 return was filed after the extended deadline?

Subject

Filing after extended due date voided extension for refund limit

Plain-English summary

The automatic extension became void when the taxpayers failed to file the original return within the extended period. Timely payment alone did not preserve it.

Once the extension was negated, the original May 2011 due date controlled the three-year refund period. The taxpayers filed the 2010 return in June 2014, after that period expired.

Result: Virginia left the refund denial unchanged.

What this means for you

• An automatic extension still requires filing by the extended deadline.
• Timely estimated payment satisfies only one condition.
• A late original return can make the original due date control refund limitations.
• File refund returns well before either possible cutoff.

Citations and references

• Va. Code §§ 58.1-341(A) and 58.1-344.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-167

Original ruling text

August 18, 2015

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek reconsideration of the Department's determination letter, issued as Public Document (P.D.) 15-37 (3/4/2015), to * (the "Taxpayers") for the taxable year ended December 31, 2010.

FACTS

In P.D. 15-37, the Department upheld the denial of a refund claim for the 2010 taxable year which the Taxpayers, a husband and a wife, had requested be credited to the 2011 taxable year, because they had not filed their 2010 Virginia individual income tax return within three years of the last day prescribed by law for the timely filing of the return. The Taxpayers filed a request for reconsideration, contending they should be allowed the refund because the return was filed in June 2014, within three years of the extended due date of November 2, 2011. They assert that they received an automatic extension of time to file their 2010 return in April 2011 and paid the full amount of tax due by the due date, May 2, 2011 (May 1, 2011, was on a Sunday).

DETERMINATION

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 a six-month filing extension of the due date for filing the income tax return.

Taxpayers are allowed to elect to take a six month extension to file their returns. In order to elect an extension, a taxpayer must (i) file the return within the extended period, and (ii) on or before the original due date for the filing of the return, pay the full amount properly estimated as the balance of the tax due for the taxable year. See Va. Code § 58.1-344. If the taxpayer 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 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.

Prior to 2005, the Department regularly granted applications for an extension to file an income tax return when a taxpayer filed an extension for federal income tax purposes. Amendments made to Virginia law in 2005 eliminated the need for a taxpayer to file a federal extension in order to be granted an automatic extension for Virginia income tax purposes. See Chapter 100, Acts of Assembly . The Taxpayers have cited P. D. 99-129 (5/28/1999) and P.D. 09-85 (5/28/2009). Both of these cases, however, where determined under the rules as they existed prior to the 2005 taxable year. Even so, P.D. 09-85 clearly states that when an original return is not filed within the extended period of time, the extension becomes void and such return is processed as if no extension was granted.

In this case, the Taxpayers' original 2010 income tax return was filed beyond the extended due date for the 2010 taxable year. As such, the Taxpayers had three years from the original due date, May 2, 2011, in which to file a timely request for refund. The statute of limitations for filing a return claiming a refund for the 2010 taxable year expired the day after May 2, 2014. The Taxpayers filed their original 2010 return in June 2014, after the applicable statute of limitations had expired. While I empathize with the Taxpayers' circumstances, I find no basis to change the Department's determination in P.D. 15-37.

The Code of Virginia sections, regulation, and public documents 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/1-6007821768.M