in-20251126-IR-045250655NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251021 Individual Income Tax For The Year 2023 HOLDING Individual failed to show the Department’s assessment was incorrect. ISSUE

I. Individual Income Tax – Assessment.

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; IC 6-8.1-9-1; 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). Taxpayer protests the assessment of additional individual income tax. STATEMENT OF FACTS Taxpayer is an Indiana resident. Taxpayer timely filed his individual income tax return for tax year 2023 and claimed a refund on the return. The Indiana Department of Revenue (“Department”) processed the return and issued the refund. Approximately two months later, the Department issued a second refund to Taxpayer related to tax year 2023 for a different amount. Taxpayer cashed this refund check. Approximately forty-five days later, the Department issued a Notice of Proposed Assessment for the amount of the second refund check plus interest. Taxpayer protested the assessment and requested resolution without a hearing. This Letter of Findings results and is based on a review of the Department’s records. Additional facts will be provided as necessary.

I. Individual Income Tax – Assessment.

DISCUSSION The Department determined that Taxpayer owed additional individual income tax related to tax year 2023. Taxpayer disagreed with the assessment and initiated a protest. 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). If a person has paid more tax than is due, IC 6-8.1-9-1(a) allows the person to request a refund from the Department. Taxpayer timely filed his 2023 IT-40 Individual Income Tax Return in mid-February 2024. Taxpayer’s return calculated a refund due (“Refund 1”), and the Department processed this refund four days after the return was filed. In mid-April 2024, a separate payment, completely unrelated to Taxpayer or his 2023 tax return, was incorrectly applied to Taxpayer’s account. The payment was applied to Taxpayer’s account due to a scrivener’s error by a third party. Because Taxpayer’s account had no balance due at the time the payment was applied to his account, the payment created an overpayment on Taxpayer’s account. The overpayment was then converted to a refund that was sent to Taxpayer (“Refund 2”) a few days after it posted to his account. Upon receipt of Refund 2, Taxpayer cashed the check. In late May 2024, the Department received information from the third party regarding Refund 2. The information clarified where Refund 2 originated and why it was incorrectly applied to Taxpayer’s account. As a result, the Department corrected the error by removing the payment from Taxpayer’s account and crediting it to the correct account. The Department then issued a Notice of Proposed Assessment in order to reclaim to Refund 2. After review, the Department must deny Taxpayer’s protest. Taxpayer was never entitled to Refund 2, and it was issued due to an error by a third party which resulted in a payment being incorrectly applied to Taxpayer’s account. The Department notified Taxpayer as soon as the error was discovered via the Notice of Proposed Assessment. Unfortunately, Taxpayer must repay the monies and interest associated with Refund 2 because he was never eligible for the refund. The protest is denied. FINDING Taxpayer’s protest is denied. March 5, 2025 Replaces Finding Document: New