in-20260930-IR-045260336NRA: Final Order of Refund Denial: 01-20251262

DEPARTMENT OF STATE REVENUE Final Order of Refund Denial: 01-20251262 Individual Income Tax For the Year 2021 HOLDING Married couple failed to establish the Department's denial of their income tax refund was incorrect. ISSUE

I. Individual Income Tax – Refund Denial.

Authority: I.R.C. § 61; IC 6-3-1-3.5; IC 6-3-2-1; Express Scripts Inc. v. Indiana Dept. of State Revenue, 170 N.E.3d 273 (Ind. Tax Ct. 2021); Treas. Reg. § 1.162-17; I.R.S., Instructions for Schedule C (Form 1040) Profit or Loss From Business (2021); I.R.S., Topic no. 511: Business Travel Expenses (2021). Taxpayers protest the denial of their individual income tax refund. STATEMENT OF FACTS Taxpayers are a married couple and Indiana residents. For tax year 2021, they filed an amended federal tax return, IRS 1040 ("Form 1040"), and an amended Indiana Full-Year Resident Individual Income Tax Return ("Form IT-40"). After review, the Indiana Department of Revenue ("Department") adjusted Taxpayers' return by decreasing their Indiana adjusted gross income ("AGI"). The Department's adjustment reduced Taxpayers' anticipated refund and resulted in an assessment. Taxpayers protested and requested a resolution with a hearing. An administrative hearing was held from which this Order of Refund Denial results. Additional facts will be provided as necessary.

I. Individual Income Tax – Assessment.

DISCUSSION Taxpayers are residents of Indiana. They originally filed Form 1040 and Form IT-40. Later, they filed an amended Form 1040 and an amended Form IT-40. After review, the Department adjusted Taxpayers' return and decreased Taxpayers' AGI. This resulted in Taxpayers' anticipated refund claim being reduced to zero and an assessment of additional income taxes. Taxpayers protested and requested an administrative hearing. During the protest review, the Department discussed the matter with Taxpayers. Taxpayers provided documentation after the hearing, including their amended Form 1040 and amended Form IT-40, as well as rideshare tax statements and bank statements. "[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). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference. Indiana imposes a tax "on 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(a). For Indiana income tax purposes, the presumption is that taxpayers properly and correctly file their federal income tax returns as required pursuant to the Internal Revenue Code. Thus, to efficiently and effectively compute what is considered the taxpayer's Indiana income tax, the Indiana statute refers to the Internal Revenue Code. IC 6-3-1-3.5(a) provides the starting point in determining the taxpayer's taxable income and calculating what would be his/her Indiana income tax after applying any particular additions and subtractions. The statute provides in part that Indiana adjusted gross income starts with "'adjusted gross income' (as defined in Section 62 of the Internal Revenue Code) . . . " Id. When submitting documentation as part of a protest, the taxpayer needs to specify and explain the portions of the evidence the taxpayer believes to be relevant. As the Indiana Tax Court has previously noted (in the context of a summary judgment motion): "the Court will not consider" exhibits "on the off chance that it might find, on its own and undirected, some fact that supports" a claim, and "the Court is not required to search for specific facts on which" a party relies. Express Scripts Inc. v. Indiana Dept. of State Revenue, 170 N.E.3d 273, 279 (Ind. Tax Ct. 2021). The Department follows this guidance in its hearing process. For both federal and Indiana income tax purposes, profits attributable to a taxpayer's trade or business reported on Schedule C are income subject to income tax pursuant to I.R.C. § 61. To properly claim a business expense deduction on Schedule C, a taxpayer is required to provide verifiable supporting documentation to demonstrate: (1) the activities of the taxpayer constitute a trade or business; (2) the expense to be deducted are paid or incurred during the taxable year in carrying on the trade or business; and (3) the expense itself is an ordinary and necessary expense in the context of the taxpayer's trade or business. Treas. Reg. § 1.162-17(a); See also I.R.S. Instructions for Schedule C (Form 1040 Profit or Loss from Business (2021) Instructions for Schedule C. Taxpayers' documentation provided during the protest includes their amended Form 1040, amended Form IT-40, 2021 rideshare tax summary, car purchase documentation, and bank statements. Wife's W-2 showed she was employed as a nurse. Husband was an independent contractor for a rideshare company and received a Tax Summary statement at the end of each tax year. Husband also ran a handyman business. Finally, Husband received unemployment in 2021 that was not taxed federally or by the State of Indiana. Taxpayers filed two Schedule Cs, one for each of Husband's business. After review, the Department requested documentation to support their claims of the income and expenses for both businesses. In response, Taxpayers provided documentation, but Taxpayers failed to explain some of their income and expenses. Further, unemployment is generally taxable pursuant to IC 6-3-2-10. Therefore, the Department's adjustments related to Schedule C income and expenses and unemployment compensation are correct. Additionally, the Department notes that Husband included meal expenses as a business expense for his independent contractor job performing rideshare services. Per IRS Topic No. 511, travel expenses that are ordinary and necessary when traveling or away from your home for a normal period of time are not deductible expenses. Absent additional information, the meal expenses are not tax deductible. FINDING Taxpayers' protest is denied. July 31, 2026 Replaces Finding Document: New