The Department assessed me for Virginia income tax based on IRS information, and I told them my husband didn't work in Virginia that year -- isn't that enough to get the assessment corrected?

Plain-English summary

The Department learned from the IRS that a husband and wife may have owed a 2019 Virginia income tax return. When its own records showed no return had been filed, the Department asked the couple for more information to determine whether their income was taxable in Virginia. They didn't respond, so the Department issued an assessment based on the information it had. The couple then appealed, arguing only that the husband didn't work in Virginia during 2019.

Why that argument missed the point. Virginia generally follows federal law for computing taxable income, starting from federal adjusted gross income (Va. Code § 58.1-301), and taxes both "domiciliary residents" and "actual residents" (Va. Code § 58.1-302). A domiciliary resident -- someone whose permanent home is Virginia and who hasn't abandoned that domicile -- owes Virginia tax on their income even if they work entirely outside Virginia, or even outside the country. And someone who lives in Virginia but commutes elsewhere for work is taxed as a resident too. Simply stating that the husband "didn't work in Virginia" doesn't establish that he wasn't a domiciliary resident, or that the couple wasn't otherwise taxable -- it doesn't engage with the actual legal test at all.

The bigger procedural problem. A Virginia tax assessment is presumed correct (Va. Code § 58.1-205), putting the burden on the taxpayer to prove otherwise. On top of that, Virginia law (Va. Code § 58.1-1826) bars courts from granting relief from an erroneous assessment where the error is attributable to the taxpayer's own willful failure to provide information the Department requested. Here, the Department had sent the couple two separate letters asking them to complete a questionnaire, and the couple never responded to either one.

Outcome. Because the couple hadn't provided the requested information, the Department upheld the assessment -- but gave them one more chance: 30 days to either file an actual 2019 Virginia return or complete the questionnaire, with any new documentation to be reviewed and the assessment adjusted as warranted. If they let that window pass too, the assessment stands as final.

What this means for you

Anyone who receives a Virginia residency inquiry after an IRS data match

If the Department asks you to complete a residency questionnaire, respond -- ignoring the request doesn't make the issue go away, and it can cut off your ability to later get judicial relief even if the assessment turns out to be wrong, because the law penalizes willful non-response separately from the merits of your residency claim.

Anyone appealing on the theory that a spouse or family member "didn't work" in Virginia

That fact alone doesn't resolve residency. Domicile turns on where your permanent home is and whether you've truly abandoned it -- not simply on where you happened to earn a paycheck. If you're contesting a residency assessment, address the domicile factors (intent, physical presence, driver's license, voter registration, property, family ties) directly rather than a single, narrower fact.

Common questions

Q: Does it matter that my spouse didn't physically work in Virginia during the year in question?
A: Not by itself. A Virginia domiciliary resident owes Virginia tax on all their income regardless of where they work, unless they've actually abandoned Virginia domicile -- and someone living in Virginia while commuting elsewhere for work is taxed as a resident too.

Q: What happens if I ignore the Department's request for more information?
A: The Department will assess based on the best information it has, and Virginia law separately bars courts from granting relief from an erroneous assessment if the error is due to your own willful failure to provide requested information -- so responding matters even apart from the merits of your case.

Q: Is there any way to fix this after an assessment like this is issued?
A: Sometimes -- here the Department gave the taxpayers a final 30-day window to file an actual return or complete the questionnaire, after which the assessment would be treated as correct if nothing was submitted.

Citations and references

Statutes:

• Va. Code § 58.1-301 -- Virginia's conformity to federal terminology/computation, starting from federal adjusted gross income
• Va. Code § 58.1-302 -- domiciliary resident and actual resident defined
• Va. Code § 58.1-205 -- Department assessment deemed prima facie correct
• Va. Code § 58.1-1826 -- no judicial relief where an erroneous assessment is attributable to the taxpayer's willful failure to provide required information

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-21

Original ruling text

March 13, 2024

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 assessments issued to * and *** (the “Taxpayers”), for the taxable year ended December 31, 2019.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, may have been required to file a Virginia income tax return for the 2019 taxable year. A review of the Department’s records showed that the Taxpayers had not filed a return. The Department requested additional information from the Taxpayers in order to determine if their income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayers filed and application for correction, contending that the husband did not work in Virginia during 2019.

DETERMINATION

Virginia Code § 58.1-301 provides, with certain exceptions, that the 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. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia . For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income (VTI) 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 Chapter 3 of Title 58.1 of the Code of Virginia .

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of that person and the place to which that person intends to return even though they may be residing elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained their place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned their Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.

The Taxpayers’ appeal merely states that the husband did not work in Virginia in 2019. As stated above, however, if the husband had been a domiciliary resident of Virginia that year, his income would have been subject to taxation even if he did not work in Virginia. Alternatively, if the husband had been living in Virginia but commuting to another state for work, he would still be subject to Virginia income tax as a resident as well.

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 he was not subject to income tax in Virginia. Furthermore, Virginia Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is attributable to a taxpayer’s willful failure or refusal to provide the Department with necessary information as required by law.

By letters dated September 1, 2023, and October 18, 2023, the Department requested that the Taxpayers complete a questionnaire in order to gain additional information so that the Department could make an informed decision concerning their Virginia income tax liability. To date, the Taxpayers have failed to respond with the requested information.

Because the Taxpayers have not furnished the requested information, I must uphold the Department’s assessment for the 2019 taxable year. I will, however, grant the Taxpayers one final opportunity to either file a 2019 Virginia return or provide a response to the questionnaire. The completed questionnaire or return must be provided within 30 days from the date of this letter. Please send the completed questionnaire or return to the Department’s Office of Tax Policy, Appeals and Rulings, P.O. Box Richmond, Virginia 23261-7203, Attn: *. Any new documentation submitted will be reviewed and the assessments adjusted as warranted. If the Taxpayers do not submit a return or the completed questionnaire within the time allotted, the assessment will be considered to be correct.

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/4666.B