My corporation's unpaid withholding tax assessment was converted to me personally as a responsible officer years after the company stopped operating -- was that too late under the statute of limitations?

Plain-English summary

A corporation, a semi-weekly withholding tax filer, ceased operations in 2017 without filing its periodic 2017 withholding returns, though it did eventually file its 2017 annual reconciliation return (Form VA-6) in January 2018. Because it didn't pay the withholding tax due with that reconciliation, Virginia assessed the corporation. When the balance went unpaid, Virginia converted the assessment to the corporation's president personally as a responsible officer, in January 2021. The officer appealed, arguing the conversion happened after the statute of limitations had already run.

The officer's argument leaned on an earlier ruling, P.D. 95-288, which applied Virginia's GENERAL three-year statute of limitations (Va. Code § 58.1-104) -- measured from the due date of the oldest relevant return -- to find a conversion untimely in that case. Applying the same logic here, the officer argued the corporation's last return was due (he said) in September 2017, so the January 2021 conversion missed the three-year window.

Virginia disagreed on which statute actually governs. Va. Code § 58.1-104 is the general assessment statute, but Va. Code § 58.1-1812 is a MORE SPECIFIC statute covering assessments of OMITTED taxes -- when a taxpayer failed to make a proper return or pay in full -- and under a well-established rule of statutory construction, a specific statute controls over a general one where they conflict. Section 58.1-1812 measures its own three-year window from the LATER of the return's due date or the date it was ACTUALLY filed. Here, the only return covering the tax at issue was the corporation's 2017 Form VA-6 reconciliation, which under Virginia's regulations was due within 30 days of the corporation's last wage payment (records showed wages were last paid in October 2017) -- but it wasn't actually filed until January 13, 2018. That later, actual-filing date controlled: the Department had until January 13, 2021 to convert the assessment, and did so on January 4, 2021 -- within the deadline. The Department also distinguished P.D. 95-288 itself: in that earlier case there was no late-filed return at issue, so there was never a need to look beyond the general three-year rule -- making it of limited relevance to a case, like this one, that specifically turns on a late-filed return and the more specific omitted-tax statute.

What this means for you

Corporate officers facing a converted personal assessment for unpaid company withholding tax

Don't assume the general three-year assessment clock (running from the return's ORIGINAL due date) is what applies to your situation. If the underlying company return was filed LATE, Virginia's more specific omitted-tax statute (Va. Code § 58.1-1812) may instead measure the three years from the actual (late) filing date -- extending the Department's deadline to convert the assessment well beyond what you'd expect from the general rule.

Businesses that stop operating mid-year without properly winding down their tax filings

File your final withholding reconciliation (Form VA-6) on time -- within 30 days of your last wage payment if you cease operations mid-year, not by the following January 31 that applies to businesses still operating. A late-filed final return can extend the window during which the Department may later convert an unpaid assessment to a responsible officer personally.

Anyone citing an older ruling to argue a limitations defense

Check whether the facts of the cited ruling actually required the court or Department to address the SPECIFIC limitations question in your case. Here, the officer's cited ruling (P.D. 95-288) never actually confronted a late-filed-return scenario, so it didn't control despite superficially similar facts.

Common questions

Q: What's the general statute of limitations for Virginia to assess a tax?
A: Three years from the last day prescribed for timely filing the return (six years for a false/fraudulent return or a failure to file), under Va. Code § 58.1-104 -- but this general rule can be superseded by a more specific statute where one applies.

Q: How is the deadline different for assessing OMITTED taxes when a return was filed late?
A: Va. Code § 58.1-1812 gives the Department three years from the LATER of the return's due date or the date it was actually filed -- so a late-filed return can push the deadline back later than the general rule would suggest.

Q: Does converting an assessment to a responsible officer follow the same deadline as assessing the original company tax?
A: Yes, in this ruling the same three-year clock under Va. Code § 58.1-1812 (running from the later of the due date or actual filing date) governed both the original assessment and its later conversion to the responsible officer.

Citations and references

• Va. Code § 58.1-1813(A) (personal penalty on a corporate officer who willfully fails to pay/collect/account for tax)
• Va. Code § 58.1-104 (general three-year, or six-year for fraud/non-filing, statute of limitations to assess tax)
• Va. Code § 58.1-1812 (specific three-year statute of limitations to assess omitted taxes, running from the later of the due date or actual filing date)
• Va. Code § 58.1-472(3) (semi-weekly withholding tax deposit/filing requirements)
• Va. Code § 58.1-478 (Employer's Annual Reconciliation, Form VA-6, due January 31 of the following year, or within 30 days of a business's last wage payment if it terminates during the year)
• 23 VAC 10-140-190(B) (VA-6 filing deadline on early business termination)
• P.D. 95-288 (11/8/1995) (prior ruling applying the general three-year rule; distinguished here because it did not involve a late-filed return)

Subject

Administration : Assessment - Converted, Statute of Limitations

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-144

Original ruling text

November 9, 2021

Re: § 1821 Appeal: Converted Assessment

Dear *:

This will respond to your letter in which you seek correction of the converted assessment issued to * (the “Taxpayer”) for the unpaid withholding tax liabilities of *** (the “Corporation”).

FACTS

The Taxpayer was the president of the Corporation when it ceased operations in August 2017. The Corporation, a semi-weekly withholding tax filer, failed to file any period returns in 2017, but did file a 2017 annual reconciliation withholding tax return in January 2018. Because the Corporation failed to pay the withholding tax due with the reconciliation, an assessment was issued. When the balance due on the assessment remained unpaid, the Department converted the assessment to the Taxpayer in January 2021. The Taxpayer filed an appeal, contending that the statute of limitations had expired to convert the assessment.

DETERMINATION

Virginia Code § 58.1-1813 A states, “Any corporate ... officer who willfully fails to pay, collect, or truthfully account for and pay over any tax administered by the Department of Taxation, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty of the amount of the tax evaded, or not paid, collected or accounted for and paid over, to be assessed and collected in the same manner as such taxes are assessed and collected.”

Every employer whose average monthly liability can reasonably be expected to be $1,000 or more, and the aggregate amount required to be withheld by an employer exceeds $500, is required to file a form with the Department within three banking days following the close of any period for which the employer is required to deposit federal withholding tax and pay the amount so withheld. See Virginia Code § 58.1-472 3.

Federal cutoff dates are generally on Tuesday and Friday of each week. See Treas. Reg. § 31.6302-1. Taxpayers must submit payment by filing a Virginia Form VA-15. Semi-weekly filers must also file a Form VA-16, Employer’s Payments Quarterly Reconciliation and Return of Virginia Income Tax Withheld, for each quarter. The VA-16 is due by the end of the month following the close of the quarter

Further, Virginia Code § 58.1-478 requires every employer to file an Employer’s Annual Reconciliation of Virginia Income Tax Withheld, Form VA-6, no later than January 31 of the calendar year succeeding the calendar year in which wages were withheld from employees. The return must include a copy of the Form W-2 or 1099 furnished to each employee. Pursuant to Title 23 of the Virginia Administrative Code (VAC) 10-140-190 B, the VA-6 must be filed no later than January 31, of the calendar year succeeding the calendar year in which wages were withheld from employees, or if the business is terminated during the year, within 30 days after the last month in which wages were paid. Although the Corporation should have filed its last return (Form VA-6) for 2017 within 30 days after it stopped paying wages, it did not file the reconciliation return until January 13, 2018.

The Taxpayer cites Public Document (P.D.) 95-288 (11/8/1995) to support its claim that the assessments were converted beyond the statute of limitations. In that ruling, the Department determined that an assessment of withholding tax was timely converted to an individual in accordance with Virginia Code § 58.1-104 because the assessment was issued within three years of the last day prescribed for the filing of the oldest return. The Taxpayer argues that the Corporation’s last tax return was due and filed in September 2017. The Department converted the Corporation’s withholding tax assessment to the Taxpayer on January 4, 2021. Based on P.D. 95-288, the Taxpayer contends that the converted assessment was made outside the three year limitations period.

Virginia Code § 58.1-104 provides:

Except as provided in Chapters 3 (§ 58.1-300 et seq .) and 6 (§ 58.1-600 et seq .) of this title, any tax imposed by this subtitle shall be assessed within three years from the last day prescribed by law for the timely filing of the return. In the case of a false or fraudulent return with the intent to evade payment of any tax imposed by this subtitle, or a failure to file a required return, the taxes may be assessed, or a proceeding in court for the collection of such taxes may be begun without assessment, at any time within six years from the last day prescribed by law for the timely filing of the return.

Because withholding tax statutes come under Chapter 3 of Title 58.1 of the Code of Virginia , Virginia Code § 58.1-104 is not necessarily controlling for all converted withholding assessments. Virginia Code § 58.1-312, which specifies statutes of limitation for taxes governed under Chapter 3, contains certain provisions governing limitation on assessments of income tax, none of which appear to apply to the facts at hand.

Pursuant to Virginia Code § 58.1-1812, however, specifically applies to the Department’s authority to issue assessments. In accordance with this statute, the Department may assess omitted taxes within three years of the latter of the due date of the return or the actual date that the return was filed.

A well recognized rule of statutory construction is “a specific or special statute supersedes a general statute insofar as there is conflict.” 1985-1986 Report of the Att'y. Gen . at 68, citing Roanoke v Land , 137 Va. 89 (1923); 1973-1974 Report of the Att'y. Gen at 306. While Virginia Code § 58.1-104 is the general statutory provision for the assessment of taxes administered by the Department, Virginia Code § 58.1-1812 applies specifically to the assessment of omitted taxes when a taxpayer “has failed to make a proper return or to pay in full any proper tax.”

In this case, the only return the Taxpayer filed that covered the assessed tax at issue was the Corporation’s Form VA-6 withholding reconciliation return. It was not filed until January 13, 2021. While the Taxpayer asserts the Corporation ceased operations in August 2017, Virginia Employment Commission (VEC) records indicate that the Corporation last paid wages in October 2017. The Corporation did not file its withholding reconciliation return within a month of it last paying wages as prescribed under Title 23 VAC 10-140-190. Rather, it filed its 2017 VA-6 on January 13, 2018. As such, pursuant to Virginia Code § 58.1-1812 A, the Department had until January 13, 2021 to convert the assessment. The Corporation’s assessment was converted to the Taxpayer on January 4, 2021, within the limitations period.

Although the Department cited Virginia Code § 58.1-104 in P.D. 95-288, there is no indication that the taxpayer in that case filed any late returns and the assessment was properly issued within the period defined by either Virginia Code §§ 58.1-104 or 58.1-1812. Because there was no need in P.D. 95-288 to look beyond the general three year limitations period starting from the last day prescribed by law for the timely filing the return, P.D. 95-288 is of limited relevance to the case at hand.

Accordingly, the Department finds that the assessment was timely converted to the Taxpayer. The Taxpayer will receive an updated bill that will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collection actions.

The Code of Virginia sections, regulation 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/3704.B

Related Documents

95-288