in-20251126-IR-045250660NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251514 Income Tax For the 2021 Tax Year HOLDING Individual established that the Department’s assessment was too high. ISSUE

I. Income Tax – Credits.

Authority: I.R.C. § 32; I.R.C. § 62; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-3-1; IC 6-3.1 et seq.; IC 6-3.1-21-6; IC 6-8.1-5-1; Stinson Estate v. United States, 214 F.3d 846 (7th Cir. 2000); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Tell City Boatworks, Inc. v. Indiana Dep’t of State Revenue, 162 N.E.3d 603, 626 (Ind. Tax Ct. 2020); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007). Taxpayer protests the assessment of additional Indiana income tax. STATEMENT OF FACTS Taxpayer is an Indiana resident who regularly files Indiana income tax returns. She timely filed her 2021 income tax return. The Indiana Department of Revenue (“Department”) received information that Taxpayer had failed to report all of her taxable income on her return. The Department accordingly issued Taxpayer an assessment for additional income tax. Taxpayer timely protested, and the Department held an administrative hearing. This Letter of Findings results. Additional facts will be provided as necessary.

I. Income Tax – Credits.

DISCUSSION Taxpayer argues that she does not owe additional Indiana income tax. The Department adjusted her return to account for her unreported income, and in so doing, the Department adjusted her EITC to $0. As a threshold issue, it is 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 Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Where a taxpayer is challenging the Department’s final determination, the taxpayer is required to provide documentation explaining and supporting its challenge. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). Additionally, “when [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.’” Indiana Dep’t 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 are 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. The starting point for determining Indiana income tax is the taxpayer’s federal adjusted gross income (“FAGI”) as defined in I.R.C. § 62, which taxpayers are directed to enter on their Indiana return before making modifications that are outlined in IC 6-3-1-3.5. Once a taxpayer’s adjusted gross income is determined, he or she may claim tax credits to reduce its taxable income. See IC 6-3.1 et seq. Like deductions, exemptions, and exclusions, tax credits are matters of legislative grace. Stinson Estate v. United States, 214 F.3d 846, 848 (7th Cir. 2000). Tax credits are narrowly construed, and the burden rests with the taxpayer to demonstrate that it qualifies for any claimed credits. Id.; Tell City Boatworks, Inc. v. Indiana Dep’t of State Revenue, 162 N.E.3d 603, 626 (Ind. Tax Ct. 2020). Individuals may claim tax credits for taxes withheld from income and paid to the Department. IC 6-3-3-1. Taxpayers who are eligible may also claim a credit called the Earned Income Tax Credit (“EITC”) equal to ten percent of the amount of the federal EITC that the taxpayer properly claimed for the tax year. IC 6-3.1-21-6(a). A taxpayer is eligible for the federal EITC when their income falls below a certain threshold determined by the number of qualifying children that the taxpayer has. See I.R.C. § 32. The Department received information that Taxpayer had failed to report $1,500 of income for the 2021 tax year. During the hearing, Taxpayer agreed that she had this income and provided the Department with a copy of the relevant W-2 documenting the income. She stated that she amended her federal income tax return to include the income in question, and she provided an account transcript from the Internal Revenue Service that showed that she had done so. Taxpayer said that she did not amend her Indiana income tax return. The Department reminds Taxpayer that if a taxpayer amends their federal income tax return, they are required to amend their Indiana income tax return. The Department and Taxpayer agree that the Department correctly added $1,500 to Taxpayer’s FAGI. Taxpayer’s W-2 shows that her employer did not withhold Indiana state or local income tax, so Taxpayer is not entitled to any additional withholding credits against this income. However, under IC 6-3.1-21-6(a), Taxpayer is still entitled to claim her EITC in full as originally filed. The Department therefore agrees with Taxpayer that the Department’s assessment is too high, and it will recalculate her taxes owed with her EITC as originally filed. The $1,500 of additional W2 income will remain as initially added by the Department since Taxpayer’s employer did not withhold on that amount. FINDING Taxpayer’s protest is sustained to the extent that the Department will restore her EITC to the amount she originally claimed, and the Department will recalculate her income tax owed. May 13, 2025 Replaces Finding Document: New