Could taxpayers apply a claimed 2008 Virginia overpayment to 2009 tax when their first 2008 return was filed in June 2014?

Subject

Return filed well beyond the three year statute of limitations.

Plain-English summary

Virginia refused to apply the claimed 2008 overpayment to the taxpayers' 2009 liability. The taxpayers did not contest the 2009 assessment generated after IRS adjustments; they asked instead to use an earlier-year overpayment against it.

The Department held that moving an overpayment to another year's bill was still governed by the refund statute. A claim generally had to be received within three years of the last date for timely filing the return.

Virginia had no record of a 2008 return before the appeal, so the copy submitted with the appeal counted as the initial filing. The return was due May 1, 2009 and was not filed until June 17, 2014. The Department said it had no authority to waive the limitation in these circumstances.

What this means for you

• Asking to credit an overpayment to another tax year does not avoid the refund deadline.
• Verify that the Department actually received the original return and preserve proof of filing.
• Federal audit adjustments do not automatically revive an expired claim for a different year's overpayment.
• Calendar refund periods separately from deadlines for reporting federal changes.

Common questions

Q: Why did refund law apply if the taxpayers requested a credit, not cash?

A: The ruling said the refund limitations also govern applying an overpayment against another year's tax.

Q: What filing date did Virginia use for the 2008 return?

A: June 17, 2014, because the Department had no record of an earlier filing.

Q: Could the Department waive the deadline?

A: No. It said it was bound by the statute and lacked authority to waive it here.

Citations and references

• Va. Code § 58.1-499(A) and (D).
• P.D. 09-88.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-87

Original ruling text

April 28, 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 an overpayment for individual income tax paid by * (the "Taxpayers") to tax due for the taxable year ended December 31, 2009. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayers were audited by the Internal Revenue Service (IRS) for the 2009 taxable year. The Taxpayers failed to file an amended Virginia income tax return reflecting the IRS adjustments. The IRS notified the Department of adjustments it made to the Taxpayers' federal income tax return. As a result, the Department issued an assessment for additional tax due. The Taxpayers filed an appeal. They do not contest the assessment for the 2009 taxable year, but request an overpayment of taxes for 2008 be applied to the balance due.

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 Taxpayers have not requested an actual refund, but have requested that an overpayment of tax for the 2008 taxable year be applied against the income tax liability for the 2009 taxable year, the laws regarding refunds apply. As stated above, Va. Code § 58.1-499 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.) 09-88 (5/28/2009).

The Department does not have a record of the Taxpayers filing a 2008 individual income tax return prior to receiving their appeal. The Taxpayers included a copy of the 2008 Virginia income tax return with the appeal. Based on the Department's records, the return provided with the appeal would be considered the initial filing of the return. The due date for the 2008 taxable year return was May 1, 2009. However, the return was not filed until June 17, 2014, well beyond the three year statute of limitations.

The Department is bound by the clear requirements under the law and is not authorized to waive the statute of limitations in this situation. Accordingly, the Taxpayers' request to credit the 2008 overpayment to the 2009 assessment is denied. An updated bill for the balance due for the 2009 taxable year with accrued interest to date will be mailed shortly. The bill should be paid within 30 days of the bill date to avoid the accrual of additional interest.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and 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/1-5752052433.D