Did filing a federal return, with no IRS adjustment, satisfy a Virginia resident's separate duty to file a 2012 Virginia return?

Subject

A taxpayer's requirement to file a Virginia income tax return is Virginia law. Merely filing a federal income tax return does not satisfy the requirement to file a Virginia income tax return.

Plain-English summary

The IRS supplied information suggesting that a Virginia resident should have filed a 2012 Virginia individual income-tax return. After the resident did not answer Virginia's information request, the Department issued an assessment from the information available.

The resident argued that the IRS had not adjusted her federal return. Virginia explained that federal conformity determines the starting point for Virginia taxable income, but Virginia law independently determines whether a resident must file a Virginia return.

Filing a federal return did not satisfy the Virginia filing requirement. Because no Virginia return had been filed, Va. Code § 58.1-111 authorized an assessment based on available information, and the assessment was presumed correct under Va. Code § 58.1-205.

The resident supplied no objective evidence that the assessment was wrong. Virginia nevertheless allowed 30 days to file the missing 2012 return so the estimated liability could be adjusted; otherwise the assessment would be upheld and collection would resume.

Citations and references

• Va. Code §§ 58.1-301, 58.1-322, 58.1-341, 58.1-321, 58.1-111, and 58.1-205.
• IRC § 6103(d).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-47

Original ruling text

April 7, 2016

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2012.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 taxable year. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. When a response was not received, the Department issued an assessment based on the available information. The Taxpayer appealed, contending that the IRS has not made any adjustments to her 2012 federal income tax return.

DETERMINATION

Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. For individual income tax purposes, Virginia "conforms" to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.

Virginia Code § 58.1-341 provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Va. Code § 58.1-321. Additionally, even if a resident is not required to file a federal return but has Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia individual income tax return. When a resident does not file a proper Virginia return, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine the resident's tax liability.

The Department's records indicate that the Taxpayer did not file a Virginia return for the 2012 taxable year. A taxpayer's requirement to file a Virginia income tax return depends on Virginia law and not on whether the IRS has made any adjustments to the taxpayer's federal income tax return. Merely filing a federal income tax return does not satisfy the requirement to file a Virginia income tax return. In this case, the Department has no record of the Taxpayer, a Virginia resident, filing a Virginia income tax return for the 2012 taxable year. Because no Virginia return was filed, the Department had the authority to issue an assessment based on available information. See Va. Code § 58.1-111.

Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show she was not subject to income tax in Virginia. In this case, the Taxpayer has provided no objective evidence to show that the Department's assessment was incorrect.

The Department's assessment was based on the information available. The Taxpayer, however, may have additional information to more accurately reflect her Virginia income tax liability. As such, the Taxpayer may file a Virginia income tax return. The return should be mailed to: Virginia Department of Taxation, P.O. Box 27203, Richmond, Virginia, 23261-7203, Attention: *, within 30 days from the date of this letter. Once the return is received, it will be processed and the assessment adjusted accordingly. If the return is not filed within the time allotted, the assessment will be upheld and collection action will resume.

The Code of Virginia sections 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/1-6235797205.M