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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I gave all the details in the original question.

Resolved Question:

I gave all the details in the original question.
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello blake,

If you posted details of your question, they did not come through. Can you please repost the question you need help with?

Customer: replied 7 years ago.
So I guess you don't receive the original questions?

My questions are regarding state tax law, Virginia imparticular.

Nearly twenty years ago I was a student in Virginia. I had a paid summer internship in New York. I earned $1000 per week for about ten weeks. I never worked nor received compensation for work in the state of Virginia in the specific year.

I am now receiving phone calls from collection agency acting on behalf of Virginia, claiming that I owe $550 in tax from that year, plus $1400 in penalties in interest.

My questions are as follows:

If I never worked in Virginia, and was living in New York while getting paid by a New York firm during my internship, would I owe Virginia state taxes?

Is there a statue of limitations on these sort of tax collection attempts?

If I do owe taxes and there is no statue of limitations, do I have to pay the penalties and interest, despite this being the first time the state of Va has attempted to contact me regarding this?

Thank you.
Expert:  Merlo replied 7 years ago.
Hello blake,

There are two instances when you are liable for state taxes:

1. In any state where you have income and
2. The state where you reside

If you were a resident of Virginia that year, then even though your income was from NY, you would have been required to file a VA state return, as well as a NY state return. But the way it works is that you would first pay tax to the state where your income was earned. You would then report that same income to your resident state, and your resident state would allow you a credit for the tax you already paid to the other state. If your resident state has a higher tax rate, then you would likely still owe some additional tax on that income. If your resident state had the same tax rate or a lower tax rate than the state where you worked, then you would owe no additional tax.

The problem here is that you likely did not file a return with VA. If you had, you could have claimed a credit for the tax you already paid to NY on that same income from your summer internship. You could still file a return and claim that credit, but I would imagine at this point in time you no longer have copies of your tax returns and records going back that far -- which means this would really be impossible to do. So unless you can show that you also paid tax to NY on this same income, you would end up owing this tax bill.

VA has a 20 year statute of limitations on collecting tax. The 20 years starts from the date that the tax was finally assessed. So as an example if this was income you had in 1990 but the state did not actually assess the tax until 1992, they would have until 2012 to collect that tax.

As far as the penalties and interest they have assessed, generally they will never waive the interest charges for any reason. The penalties might be waived or partially waived if you request that they consider this, but there is no guarantee. Even though you are just now being notified, they likely did send you prior notices, but probably sent them to the last address they had on file for you. Once the collection agency took over the debt, they apparently dug a little deeper to find your current location.

But you do have the right to work directly with the state on this rather than the collection agency. All you need to do is write a letter to the collection agency stating your intention to work directly with the state on this matter. You could then write a letter to the state explaining the circumstances, and they may be willing to waive part or all of the penalties. Your other option of course is to find out the date this tax was actually assessed and see how much longer you have before collection activities will be suspended.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you blake.

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