Ezel / Tax Rulings / VA
VA P.D. 17-153 Individual Income Tax 2017-08-24

Could Virginia assess 2013 income tax from final IRS audit information when the taxpayer failed to file an amended Virginia return?

Short answer: Yes. Virginia required the taxpayer to report the final federal change within one year. Because he did not file an amended Virginia return, the Department could assess from the IRS information and would not re-examine the IRS's final determination. A later IRS revision could support a corrective Virginia amended return.

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This page answers the general question as of 2017. Ezel answers yours, under current Virginia tax law, with citations.

Currency note: this ruling is from 2017
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official published Ruling of the Virginia Tax Commissioner (Virginia Department of Taxation), issued as a redacted public document. It is based on the specific facts the taxpayer presented and the law in effect when issued; different facts or later changes in the law can change the result, and another taxpayer should not assume it applies to their situation. Virginia's retail sales and use tax is administered by the Department, but many Virginia local taxes, including the business license (BPOL) tax, business tangible personal property tax, and machinery and tools tax, are administered by local commissioners of the revenue. This summary is informational only and is not legal or tax advice. Consult a licensed Virginia tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
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Subject

Virginia Assessment Based on Final IRS Adjustments

Plain-English summary

The IRS adjusted the taxpayer's 2013 federal return, but the taxpayer did not file the required amended Virginia return. Virginia therefore assessed tax using the federal information.

The assessment was upheld. Section 58.1-311 required reporting a final federal correction within one year, and § 58.1-312 A 3 allowed Virginia to assess at any time when that amended return was not filed. The Department did not look behind the IRS's final determination.

If the IRS later changed its 2013 findings, the taxpayer could file an amended Virginia return to correct the state liability.

Citations and references

  • Va. Code §§ 58.1-311, 58.1-312 A 3, and 58.1-1823 A(ii).
  • P.D. 11-107.

Source

Original ruling text

August 24, 2017

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, 2013.

FACTS

The Taxpayer was audited by the Internal Revenue Service (IRS) for the 2013 taxable year, and the IRS notified the Department of adjustments it made to the Taxpayer's federal income tax return. The Taxpayer failed to file an amended Virginia income tax return reflecting the IRS adjustments. As a result, the Department issued an assessment based on the IRS information. The Taxpayer filed an appeal, contending he did not have the amount of income on which the assessment was based.

DETERMINATION

Virginia Code § 58.1-311 requires any individual to report a change or correction in federal taxable income within one year of the final determination of such change or correction by filing an amended return with the Department. If the taxpayer fails to file an amended return reflecting the federal adjustment, Va. Code § 58.1-312 A 3 permits the Department to assess the appropriate tax at any time.

Where the IRS has audited the federal taxable income of a taxpayer, the Department does not look behind the IRS's final determination. See Public Document (P.D.) 11-107 (6/14/2001). The Department adjusted the Taxpayer's 2013 return based on the federal information available from the IRS as permitted by Virginia statute. As such, the 2013 assessment remains due and payable.

The Taxpayer will receive an updated bill with accrued interest to date. The bill should be paid within 30 days of the bill date to avoid the accrual of additional interest. If the IRS adjusts its audit findings for the 2013 taxable year, the Taxpayer will be permitted to file an amended return to correct his liability pursuant to Va. Code § 58.1­311 and Va. Code § 58.1-1823 A(ii).

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/1218.M

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