in-20260826-IR-045260291NRA: LETTER OF FINDINGS: 01-20252238

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20252238 Individual Income Tax For the Year 2023 HOLDING Individual Taxpayer failed to establish that the Department’s assessment of additional income tax was incorrect; however, Individual Taxpayer established the Department’s disallowance of certain exemptions was in error. ISSUE

I. Individual Income Tax – Burden of Proof.

Authority: IC 6-1.1-20.6-8.5; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); IT-40 Full-Year Resident Individual Income Tax Booklet (2023). Taxpayer protested the Department’s assessment of additional income tax. STATEMENT OF FACTS Taxpayer is an Indiana resident. For tax year 2023, Taxpayer timely filed her Form IT-40 Individual Income Tax Return. On the return, she reported state and local taxes withheld by her employer. The Indiana Department of Revenue (“Department”) reviewed Taxpayer’s return and determined the withholding figures were incorrect based on the W-2 provided. Additionally, the Department had disallowed Taxpayer’s claimed exemptions. As a result, the Department issued a Notice of Proposed Assessment for additional income tax. Taxpayer protested and requested resolution without a hearing. This Letter of Findings results and is based on information provided by Taxpayer and the Department’s records. Additional facts will be provided as necessary.

I. Individual Income Tax – Burden of Proof.

DISCUSSION The Department determined that Taxpayer owed additional individual income tax related to tax year 2023. Taxpayer disagreed and initiated a protest. In support, Taxpayer provided an explanation of what she believed occurred along with copies of her individual tax return and complete W-2 and 1099s. As a threshold issue, it is the taxpayer’s responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that the Department’s claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment, including a taxpayer’s penalty assessment, is therefore presumed valid. A taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. Additionally, “[W]hen [courts] examine a statute that an agency is ‘charged with enforcing . . . [courts] defer to the agency’s reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.’” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Indiana imposes a tax “upon the adjusted gross income of every resident person, and on that part of the adjusted gross income derived from sources within Indiana of every nonresident person.” IC 6-3-2-1(b). IC 6-3-2-2(a) outlines what is income derived from Indiana sources and subject to Indiana income tax. There is a presumption that a taxpayer files his/her federal income tax return as required by the Internal Revenue Code. Thus, to effectively compute what is considered a taxpayer’s Indiana income tax, Indiana law refers to the Internal Revenue Code. IC 6-3-1-3.5 provides a starting point in determining a taxpayer’s taxable income and calculating what would be his/her Indiana income tax after applying certain additions and subtractions, with any necessary modifications following. Modifications are outlined in IC 6-3-1-3.5(a). Indiana allows credit for state and county taxes withheld on a taxpayer’s behalf. IT-40 Full-Year Resident Individual Income Tax Booklet (2023). State and county taxes are reported on separate lines on the return. Id. A taxpayer is directed to complete Schedule IN-W and provide copies of his/her W-2, W-2G, 1099, Form IN MSID-A, and/or Schedule IN K-1. Id. When Taxpayer filed her Form IT-40 Individual Income Tax Return, she calculated a withholding tax credit of approximately $1,489 for local income taxes. When the Department reviewed the return and W-2, it determined the correct withholding tax amount was $13.25 in local withholding. The amount Taxpayer had input was the amount of Taxpayer’s wages from that employer. Taxpayer’s employer only withheld a total of $32.99 in state and local income taxes for Indiana, which is the dollar amount Taxpayer should have calculated on Schedule 5, which is then transferred to Line 12 of the Form IT-40. By entering the incorrect amount of her state and local income tax withholdings, Taxpayer ultimately miscalculated the total amount of credit available to her. Taxpayer has not shown that the Department’s assessment was incorrect under IC 6-8.1-5-1 regarding Taxpayer’s income tax liability. Upon review of Taxpayer’s return, however, the Department was able to agree with Taxpayer that the Department had incorrectly disallowed Taxpayer’s claimed exemptions on her Schedule 3, which were permissible pursuant to IC 6-1.1-20.6-8.5. The Department has since corrected that adjustment and allowed Taxpayer’s exemptions as claimed. FINDING Taxpayer’s protest is sustained to the extent that the Department has corrected its disallowance of Taxpayer’s claimed Schedule 3 exemptions. Taxpayer’s protest is denied to the extent that a balance remains for Taxpayer’s underpayment of income taxes. June 23, 2026 Replaces Finding Document: New