Could late 2005-2009 overpayments be credited to 2012-2013 assessments when disability prevented the taxpayer from filing until March 2014?

Subject

The Department disallowed the refunds claimed because the statute of limitations had expired

Plain-English summary

Virginia refused to apply the taxpayer's 2005-2009 overpayments against his 2012 and 2013 assessments because all refund periods had expired. Calling the requested amounts credits rather than cash refunds did not change the limitation rule.

The taxpayer filed all five old returns in March 2014. Even the latest year, 2009, had a May 3, 2010 original due date and therefore a May 3, 2013 refund deadline. The earlier years had expired sooner.

Mental and physical disability did not suspend the periods. Virginia law required an individual unable to file because of disability to arrange filing through a fiduciary or authorized agent. The old overpayments could not reduce the later assessments, which remained due with interest.

What this means for you

• Overpayments used as credits are subject to the same timing rules as refunds.
• Calculate the deadline separately for every tax year.
• Arrange for a fiduciary or authorized agent to file when disability prevents personal filing.
• Collection alternatives such as an offer in compromise or payment plan do not revive an expired refund claim.

Common questions

Q: Did requesting a credit instead of a refund avoid the deadline?

A: No. Virginia applied the refund limitation to both.

Q: What was the latest deadline among the years involved?

A: May 3, 2013 for the 2009 return.

Q: Did disability suspend the limitation period?

A: No.

Citations and references

• Va. Code §§ 58.1-499(A), (D) and 58.1-341(A), (F).
• P.D. 09-88 and P.D. 10-204.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-55

Original ruling text

April 3, 2015

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you appeal the Department’s denial of the application of overpayment credits for individual income tax paid by * (the “Taxpayer”) for the taxable years ended December 31, 2005 through 2009.

FACTS

The Taxpayer filed Virginia individual income tax returns for the 2005 through 2009 taxable years in March 2014. The returns reported overpayments that the Taxpayer requested be credited towards his income tax liabilities for the 2012 and 2013 taxable years. The Department disallowed the refunds claimed because the statute of limitations had expired. The Department also issued assessments for the 2012 and 2013 taxable years.

The Taxpayer appeals the disallowance of the overpayment credits. He asserts that he suffered from mental and physical disabilities and was unable to timely prepare and file his Virginia returns.

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 Department 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 Taxpayer requested that the overpayment of tax for the 2005 through 2009 taxable years be applied against his income tax liability for the 2012 and 2013 taxable years instead of a refund, the laws regarding refunds still apply. See Public Document (P.D.) 09-88 (5/28/2009).

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. Based on Virginia statutes, the due date for the last taxable year at issue, 2009, was May 3, 2010 (May 1 was on a Saturday). As such, a return was required to be filed by May 3, 2013, in order to receive a refund for the 2009 taxable year.

The Department's records indicate that the Taxpayer's original returns for the 2005 through 2009 taxable years were filed in March 2014, well after the applicable statute of limitations periods had expired for those years. Accordingly, the Taxpayer's request to credit the overpayments for the 2005 through 2009 taxable years to the 2012 and 2013 assessments cannot be granted.

In addition, Va. Code § 58.1-341 F provides that an individual who is unable to make a return because of a disability has the responsibility of having such return filed by a fiduciary or duly authorized agent. Thus, Virginia law addresses the requirements of filing returns for taxpayers who have disabilities. While a severe illness or medical condition may be considered a disability for purposes of Va. Code § 58.1-341 F, the statute does not provide for the suspension of the statute of limitations for an individual who is mentally or physically disabled. See P.D. 10-204 (9/2/2010).

While I empathize with the Taxpayer's situation, the Department is bound by the clear requirements under the law. Updated bills will be issued shortly, which will include accrued interest. The Taxpayer should remit payment within 30 days of the bill date to avoid the accrual of additional interest.

If the Taxpayer wishes to pursue an offer in compromise for doubtful collectibility as a result of his current financial circumstances, he may submit an Offer in Compromise - Individual Request for Settlement, accompanied with a Financial Information Statement. The completed forms should be sent to: Tax Commissioner, Virginia Department of Taxation Attn: CICT, Post Office Box 2475, Richmond, Virginia 23218-2475. For questions, the Taxpayer may contact a member of the Collections team at (804) 367-8045. Upon completion of that review, a response will be issued to the Taxpayer. Alternatively, the Taxpayer may call the number above to set up a payment plan.

The Code of Virginia sections 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/1-5846659109.M