in-20250827-IR-045250399NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251103 Individual Income Tax For The Year 2023 HOLDING Individual has not established that the Department’s assessment for local income tax was incorrect. ISSUE

I. Tax Administration – Penalties and Interest.

Authority: IC 6-3-2-1; IC 6-3-2-2; IC 6-3.6-2-13; IC 6-3.6-4-1; IC 6-8.1-5-1; IC 6-8.1-10-2.1; IC 6-3.6-8-3; 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); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); 45 IAC 15-11-2. Taxpayer protests the Department’s assessment for local income tax. STATEMENT OF FACTS Taxpayer is a resident of Indiana. During the 2023 tax year, Taxpayer was employed by an out-of-state company that operates locations within Kentucky (“Company”). Company withheld federal and state income tax from Taxpayer’s salary. Taxpayer filed an Indiana Full-Year Resident Individual Income Tax Return (“IT-40”) for 2023. After a review, the Indiana Department of Revenue (“Department”) issued an assessment for additional income tax. Taxpayer disagreed and protested the assessment. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Tax Administration – Penalties and Interest.

DISCUSSION The Department determined that Taxpayer owed additional income tax after reviewing his 2023 tax return. Taxpayer disagreed and protested the assessment. In support, Taxpayer provided a copy of his W-2 for 2023 and a copy of his divorce decree. 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 6-8.1-5-19(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id. Consequently, a taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. See 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). 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. IC 6-3-2-2(a) outlines what is income derived from Indiana sources and subject to Indiana income. In terms of county taxes, such as local income taxes, IC 6-3.6-4-1 provides that, “a tax is imposed on the adjusted gross income of local taxpayers at a tax rate that is a sum of the tax rates imposed by the county’s adopting body and in effect in the county.” Pursuant to IC 6-3.6-2-13, a local taxpayer is defined as: Taxpayer believes the Department’s proposed assessment for Local Income Tax (“LIT”) for the 2023 tax year is incorrect. He argues that these complications stem from a dispute with his former spouse over the claiming of their children as dependents on her tax returns. Here, Taxpayer is an Indiana resident who was employed by and earned the entirety of his income from an out-of-state company. A review of Taxpayer’s 2023 tax return and W-2 demonstrates that while Company appropriately withheld federal and state income tax, it did not withhold LIT as required under Indiana statute. The Department’s assessment for additional income tax stems from this error with LIT and does not result from Taxpayer not being allowed to claim his children as dependents on his 2023 return. During the hearing, Taxpayer stated that he did not file a Kentucky return for tax year 2023 nor did he pay any income taxes to Kentucky. If Taxpayer did pay any state or local income tax, he would need to complete Schedule 6 Form and include it with his IT-40 to receive credit for taxes paid in another state. Doing so would prevent Taxpayer from having to pay more in taxes than he owed. Finally, the Department notes that on Taxpayer’s IT-40, the reported counties of residence and employment were incorrect. On his IT-40, Taxpayer used the county code for Boone County, Indiana, as his county of residence and employment. This is inaccurate as Taxpayer resides Switzerland County and was employed in Kentucky. The correct county code for Switzerland County is “78,” while the correct out-of-state code related to his Kentucky employment is “95.” Taxpayer is reminded to complete his IT-40 with correct information related to his residency and employment in future tax years to avoid further complications. In summation, Taxpayer received credit for his children as dependents on his 2023 tax return. The Department’s assessment stems from a withholding error related to LIT. Under IC 6-8.1-5-1 Taxpayer has not met the requisite burden of proof and has not established that the Department’s assessment for LIT was incorrect. FINDING Taxpayer’s protest is denied. June 23, 2025 Replaces Finding Document: New