Could taxpayers carry a 2010 overpayment into 2011 when their original 2010 return was filed after Virginia's refund deadline?

Subject

Late-filed overpayment could not be carried to the next tax year

Plain-English summary

The taxpayers could not carry their 2010 overpayment into 2011 because their original 2010 return was filed after Virginia's three-year refund deadline. Calling the requested relief a carryforward credit instead of a cash refund did not avoid the limitation.

The taxpayers filed the 2010 return in June 2014. The ruling states that the limitation period expired on May 2, 2014 because May 1, 2011 fell on a Sunday. Virginia's refund statute applies whether the Department discovers the overpayment or the taxpayer submits a written application.

The taxpayers argued that they were not asking for money back and only wanted the overpayment credited against a later year's estimated-tax liability. The Commissioner held that refund law still governed the overpayment, so the late claim could not be credited to 2011.

What this means for you

• A request to carry an overpayment forward is still subject to Virginia's refund limitation period.
• Filing an original return after the deadline can forfeit both a cash refund and use of the overpayment as a later-year credit.
• The relevant deadline in this ruling was measured from the last day prescribed for timely filing, not from the taxpayers' eventual filing date.

Common questions

Q: Did it matter that the taxpayers did not ask for a cash refund?

A: No. The Commissioner applied the same refund limitation to their requested carryforward credit.

Q: When was the 2010 return filed?

A: In June 2014, after the May 2, 2014 expiration date stated in the ruling.

Q: Could the overpayment offset the 2011 tax year?

A: No. The ruling concluded that it could not be credited to 2011.

Citations and references

• Va. Code §§ 58.1-1821, 58.1-499 A and D, and 58.1-341 A.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-37

Original ruling text

March 4, 2015

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek a credit for the individual income tax overpaid by * (the "Taxpayers") for the taxable year ended December 31, 2010.

FACTS

The Taxpayers filed their individual income tax return for the 2010 taxable year in June 2014. The Department denied the refund claimed on the return because the return was filed outside the statute of limitations. The Taxpayers filed an appeal, stating that they are not seeking a refund. Instead, the Taxpayers request that the Department allow them to carry forward an overpayment credit to avoid the underpayment of estimated taxes in subsequent taxable years.

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.]

Although the Taxpayers have not requested an actual refund but have requested that the overpayment be carried forward to offset their liability for the subsequent taxable year, the laws regarding refunds still apply. As stated above, Va. Code § 58.1­499 requires that an application for refund must be received within three years from the last day prescribed by law for the timely filing of the return. See Public Document (P.D.) 06-136 (10/30/2006).

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. The statute of limitations for the 2010 taxable year expired on May 2, 2014 (May 1, 2011 was on a Sunday). The Taxpayers' original return for 2010 was filed in June 2014. As such, the 2010 return was not filed within the limitations period provided in Va. Code § 58.1-499, and the overpayment cannot be credited to the 2011 taxable year.

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/1-5803069366.M