in-20260422-IR-045260103NRA: LETTER OF FINDINGS: 01-20241860

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241860 Individual Income Tax For The Year 2022 HOLDING Taxpayers failed to provide evidence that the assessment of additional income tax was incorrect. ISSUE

I. Individual Income Tax - Burden of Proof.

Authority: 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). Taxpayers protest the assessment of additional individual income tax. STATEMENT OF FACTS Taxpayers are a married couple who reside in Indiana. Wife is a wedding planner, and Husband is a consultant for a company. For tax year 2022, Taxpayers filed Form IT-40, including Schedule Cs, detailing their business income and expenses. When Taxpayers failed to submit supporting documentation, the Indiana Department of Revenue (“Department”) issued a Notice of Proposed Assessment (“NOPA”) for additional individual income tax. Taxpayers disagreed and protested the assessment. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Individual Income Tax - Burden of Proof.

DISCUSSION The Department reviewed Taxpayers' return and requested additional documentation to support income and losses claimed on their Schedule Cs. Taxpayers did not submit any supporting documentation to the Department, and the Department issued a NOPA for additional income tax, which Taxpayers timely protested. Taxpayers' only documentation in support of their protest are copies of their federal and state returns filed using a commercial tax software program. 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 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(a). 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). The Department's initial review of Taxpayers' 2022 tax return showed that their income was unsubstantiated. The Department requested documentation to support their reported income and losses. Husband stated he could find supporting documentation to remit to the Department; however, Taxpayers have submitted no supporting documentation to the Department after having been extended multiple opportunities to do so. In summary, Taxpayers' protest is denied due to Taxpayers failing to meet the burden of proof. Taxpayers have provided no supporting documentation to verify their Schedule Cs incomes and losses; therefore, Taxpayers have not shown that the Department's assessment was incorrect under IC 6-8.1-5-1(c). FINDING Taxpayers' protest is respectfully denied. February 4, 2026 Replaces Finding Document: New