If I discover years later that I was entitled to a Virginia tax subtraction I never claimed, can I still get a refund by filing an amended return?

Plain-English summary

A married couple filed their Virginia returns on time every year from 2012 through 2019, but didn't know that Virginia law lets taxpayers subtract Social Security income that's taxable on their federal return from their Virginia taxable income. After learning about the subtraction sometime in 2020, they filed amended returns for all eight years claiming it and requesting refunds. The Department approved refunds for 2015 through 2019, but denied the 2012, 2013, and 2014 refund claims because those amended returns were filed outside the applicable statute of limitations.

Virginia law generally requires an amended return claiming a refund to be filed within three years of the original (or extended) due date. Based on the couple's actual filing dates, their deadlines to amend the 2012, 2013, and 2014 returns fell in May 2016, May 2017, and May 2018 respectively, but they didn't file their amended returns for those years until September 2020, more than two years past even the latest of those deadlines. The couple explained they filed late because they simply didn't understand until 2020 that Virginia law allowed the subtraction at all. The Department was sympathetic, but explained that a longstanding legal principle, going back to an 1828 Virginia Supreme Court case, holds that people generally can't escape the legal consequences of their actions by claiming they didn't know the law. Since the Department has no statutory authority to waive the three-year deadline for any reason, including a taxpayer's genuine unawareness of an available tax benefit, the 2012-2014 refund requests had to be denied.

What this means for you

Anyone who discovers a missed deduction, subtraction, or credit on a past Virginia return

Act quickly once you learn about it. Virginia's general rule requires an amended return claiming a refund to be filed within three years of the original return's due date, and "I didn't know the tax break existed" is not a recognized exception to that deadline, no matter how genuine the confusion.

Accountants and tax preparers reviewing new clients' prior-year returns

If you spot a missed subtraction, deduction, or credit going back several years, prioritize amending the most recent years first if the statute of limitations is close to expiring on any of them -- older years may already be time-barred by the time the issue is discovered.

Anyone assuming a sympathetic explanation will excuse a late refund claim

The Department has consistently held it has no discretion to waive the statutory refund deadline based on hardship or a reasonable explanation for the delay; the three-year window is a hard legal limit, not a guideline.

Common questions

Q: How long do I have to file an amended Virginia return claiming a refund?
A: Generally three years from the original (or extended) due date of the return being amended, under Va. Code § 58.1-1823 and § 58.1-499.

Q: Does not knowing about a tax subtraction or deduction excuse a late refund claim?
A: No -- Virginia courts have long held that ignorance of the law doesn't excuse missing a legal deadline, and the Department has no authority to waive the statute of limitations on that basis.

Q: If some years of my refund claim are on time and others are late, will the Department still process the timely ones?
A: Yes -- as in this case, the Department issued refunds for the years within the three-year window while denying the years outside it, rather than denying the entire multi-year claim.

Citations and references

• Va. Code § 58.1-499 (three-year deadline for refund claims; overpayment of tax)
• Va. Code § 58.1-1823 (three-year deadline to file an amended return claiming a refund)
• Brown v. Armistead, 27 Va. 594 (1828) (ignorance of the law does not excuse a person from its legal consequences)

Subject

Administration: Statute of Limitations - Amended Return Claiming A Refund

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-153

Original ruling text

November 16, 2022

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek a refund of individual income tax paid by * (the “Taxpayers”) for the taxable years ended December 31, 2012 through 2014.

FACTS

The Taxpayers timely filed their Virginia individual income tax returns for the 2012 through 2019 taxable years without claiming a subtraction for Social Security income that was taxable on their federal returns. See Virginia Code § 58.1-322.02 3. Subsequently, they filed amended returns to claim the subtraction each year and request refunds. The Department issued refunds for the 2015 through 2019 taxable years. The Department, however, notified the Taxpayers that the refunds for the 2012 through 2014 taxable years were denied because the amended returns were filed outside of the statute of limitations. The Taxpayers appeal, requesting that the Department issue the refunds.

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].

In addition, the general rule is that an amended return must be filed within three years of the original or extended due date, as applicable, to claim a refund. See Virginia Code § 58.1-1823. This code section includes a number of exceptions to the general rule when specific circumstances are present. In this case, none of those circumstances apply and thus the general three year rule must be used to determine the dates by which the Taxpayers may claim a refund by filing amended returns.

The Department’s records show that the Taxpayers’ original 2012, 2013 and 2014 returns were due on May 1, 2013, May 1, 2014, and May 1, 2015, respectively. Under the general rule, the Taxpayers had until May 2, 2016 (May 1, 2016, was a Sunday), May 1, 2017, and May 1, 2018, to file amended returns for the relevant taxable years. The Taxpayers did not file their amended 2012 through 2014 Virginia returns until September 17, 2020, well after the three year statute of limitations had expired.

The Taxpayers contend that they filed their amended returns late because they did not understand that Virginia law allowed them to exclude their social security benefits from income until sometime in 2020. The Supreme Court of Virginia has long accepted the principle that individuals may not avoid the legal consequences of their actions by pleading ignorance of the law. See Brown v. Armistead , 27 Va. 594, 601, 1828 Va. LEXIS 43 (1828). The Taxpayers, therefore, could not avoid the application of the statute of limitations by being unaware of their eligibility for the subtraction.

While I empathize with your situation, the Department is bound by the clear requirements under the law and has no authority to waive the statute of limitations in this case. Accordingly, I am unable to grant the Taxpayers’ request for refunds for the 2012 through 2014 taxable years.

The Code of Virginia sections cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/4178.X