Section 160. Assessments and administrative remedies

A. Types of remedies. Article 2 (§ 58.1-1820 et seq.) of Chapter 18 of Title 58.1 of the Code of Virginia provides several administrative and judicial remedies for taxpayers who believe an assessment to be erroneous. In addition, § 58.1-105 of the Code of Virginia authorizes the Tax Commissioner to accept an offer in compromise in certain circumstances. The various remedies available for taxes administered by the department may be summarized as follows:

1. Offer in compromise under § 58.1-105 of the Code of Virginia, which may be used to waive or compromise a penalty for good cause or to compromise a tax based on a doubtful or disputed claim or a liability of doubtful collectibility.

2. Application for correction of an erroneous assessment under § 58.1-1821 of the Code of Virginia before payment of the assessment, which may be used to protest any or all issues connected with an assessment. See 23VAC10-20-165 for the full explanation of the administrative appeals process.

3. Amended return claiming a refund under § 58.1-1823 of the Code of Virginia, which may be used to amend a return based upon new or newly discovered facts such as errors discovered in the original return or a change in federal taxable income.

4. Protective claim under § 58.1-1824 of the Code of Virginia after payment of the assessment, which may be used to protest any or all issues connected with an assessment and, in certain circumstances, may extend the time in which taxpayer may apply to a court. See 23VAC10-20-190 for more information on protective claims.

5. If the above administrative remedies are not satisfactory to the taxpayer, an application to a court may be made under § 58.1-1825 of the Code of Virginia.

B. Exhaustion of administrative remedies. Although not required by law, taxpayers are encouraged to exhaust their administrative remedies before resorting to litigation. Administrative reviews remain confidential pursuant to §§ 58.1-3 and 58.1-204 of the Code of Virginia. Even if a dispute cannot be resolved administratively, the issues in dispute may be significantly narrowed allowing expeditious court review.

C. Person assessed. Any person assessed with any tax, as such term is defined in § 58.1-1820(1) of the Code of Virginia, may file an application for correction or a protective claim.

D. Assessments.

1. When referring to taxes administered by the department, the terms "assess" and "assessment" mean the act of determining that a tax (or additional tax) is due and the amount of such tax. An assessment may be made by the department or by the taxpayer (self-assessment).

2. When an assessment is made by the department, a written notice of the assessment must be delivered to the taxpayer by an employee of the department or mailed to the taxpayer at his last known address. The date that such notice is mailed or delivered is the date of the assessment for the purpose of any limitations on the time in which administrative and judicial remedies are available and for any other administrative purposes.

3. The written notice of an assessment made by the department is made on a form clearly labeled "Notice of Assessment" that sets forth the date of the assessment, amount of assessment, the tax type, taxable period and taxpayer. Subsequent statements that merely report payments and additional accrued interest are not assessments or notices of another assessment. An assessment may be preceded by correspondence proposing adjustments to a filed return based on an audit or other information received by the department. Such correspondence is not an assessment but is intended to provide taxpayers an opportunity to correct any errors before an assessment is made.

4. A self-assessment is usually made when the taxpayer files a return. If an annual, quarterly or monthly return is not required to be filed for a tax then the self-assessment is usually made when the tax is paid. The date of assessment is the date of filing or payment except that:

a. A return filed or tax paid before the last day prescribed by law for the filing or payment thereof, including extensions granted pursuant to law, shall be deemed to be filed or paid on such last day.

b. After the department has mailed or delivered a notice of assessment a return filed or tax paid shall be deemed filed or paid pursuant to the notice. Such filing or payment is not a self assessment. The date of assessment shall be the date the notice of assessment was mailed or delivered, not the date the return was filed or the tax paid.

c. In certain circumstances the date a return or payment is mailed will be deemed the date of filing or payment. See § 58.1-9 of the Code of Virginia.

5. A jeopardy assessment under § 58.1-313 or 58.1-631 of the Code of Virginia occurs when the Tax Commissioner finds that collection of income, sales or use taxes will be jeopardized by delay, terminates the current taxable period and assesses tax, penalty and interest. A jeopardy assessment is an assessment for purposes of administrative remedies and a taxpayer may protest either the finding of jeopardy or the amount of liability, or both.

6. The date of an assessment is not affected if the amount of the assessment is later corrected, whether the correction is the result of an application under § 58.1-1821 or 58.1-1824 of the Code of Virginia or made on the department's own initiative after receiving additional information. The department will not correct an assessment by increasing the amount of liability (except for additional accrued interest). If the department determines that the proper tax is greater than the amount previously assessed and paid, the department will make a second assessment unless the period for assessing additional tax has expired. The second assessment may be for the total amount due (in which case the first assessment will be abated) or for only that portion of the tax due that has not yet been assessed, whichever is appropriate in the opinion of the department.

7. Amended returns claiming refunds under § 58.1-1823 of the Code of Virginia are not assessments or self-assessments. However, for the purpose of allowing a taxpayer to pursue administrative and judicial remedies, the denial or failure to act upon a refund claim is deemed to be an assessment, but only as to matters first raised in the amended return claiming a refund. A matter shall not be considered first raised in an amended return claiming a refund if it was previously the subject of an audit or an application under § 58.1-1821, 58.1-1824 or 58.1-1825 of the Code of Virginia. The date of such deemed assessment shall be the date of an order of the department denying the refund claim or three months from the date the amended return was filed with the department, whichever is earlier.

Historical Notes

Derived from VR630-1-1820, eff. January 1, 1985, with retroactive effect according to § 58.1-203 of the Code of Virginia; amended, Virginia Register Volume 25, Issue 8, eff. March 8, 2009.

Statutory Authority

§ 58.1-203 of the Code of Virginia.