Could taxpayers obtain review of a 2011 refund after the ordinary three-year period when they promptly reported a final federal change?

Plain-English summary

The taxpayers filed an amended 2011 return in 2016, after the ordinary three-year refund period, and Virginia denied the claim. They later received an IRS letter changing their 2011 federal adjusted gross income and sent it to Virginia within 30 days.

Virginia law allowed 60 days after a final federal determination to request a related state refund. Because the taxpayers reported the federal change within that period, Virginia directed the Department to review the amended return and issue any refund warranted by that review.

Citations and references

• Va. Code § 58.1-499 A and D
• 23 VAC 10-20-180 B

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-29

Original ruling text

March 20, 2018

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you request that the Department reconsider its denial of a Virginia individual income tax refund for * (the “Taxpayers”) for the taxable year ended December 31, 2011. I apologize for the delay in responding to your request.

FACTS

The Taxpayers, a husband and wife, filed a 2011 Virginia individual income tax return. In March 2016, it was discovered that the Taxpayers did not report all of their income and withholding and an amended return was filed with the Department and the Internal Revenue Service. The Department denied the Taxpayer's claim for refund on the basis that the statute of limitations for claiming such a refund had expired. In December 2016, the Taxpayers received a letter from the Internal Revenue Service (IRS), indicating their federal adjusted gross income (FAGI) for the 2011 taxable year was adjusted. The Taxpayers filed an appeal and included the federal determination letter. The Taxpayers request refund of the 2011 overpayment.

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. Subsection D, however, prohibits such refund if such discovery is not made or written application is not received within three years from the last day prescribed by law for the timely filing of the return.

Virginia Code § 58.1-499 D provides taxpayers sixty days from the date of a final determination regarding any change or correction in the liability of the taxpayer for any federal tax upon which the state tax is based to request a refund. Title 23 of the Virginia Administrative Code (VAC) 10-20-180 B, defines a final determination of a change in liability for federal tax purposes to include with certain exceptions, the refund by the IRS of any federal income or estate tax. A final determination may also include a copy of an RAR, Form 870, 90-day letter, closing agreement, or court decision.

The Taxpayers provided a copy of their federal determination letter within 30 days from the determination date. Because the Taxpayers notified the Department within the time period specified by law, they are entitled to a review of their 2011 amended return and a refund as warranted.

The Code of Virginia section and regulation 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/1154.o