in-20250730-IR-045250359NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242216 Individual Income Tax For the 2023 Tax Year HOLDING Individual carried her burden to show that she reported her Schedule C income accurately except for the online sales, which were misreported. ISSUE

I. Individual Income Tax – Burden of Proof.

Authority: I.R.C. § 62; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-8.1-5-1; IC 6-8.1-5-4; 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); 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 Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Taxpayer protests the assessment of additional Indiana income tax due to a partial denial of her Indiana Earned Income Credit. STATEMENT OF FACTS Taxpayer is an Indiana resident who regularly files returns with the Indiana Department of Revenue (“Department”). Taxpayer reported income from three businesses on her 2023 federal Schedule C forms, and she claimed the Indiana Earned Income Credit based in part on this income. The Department adjusted her income because Taxpayer had not substantiated her Schedule C income, and it issued a Notice of Proposed Assessment accordingly. Taxpayer timely protested, and this Letter of Findings results. Because Taxpayer waived her right to a hearing, this Letter of Findings relies on documents and analysis that Taxpayer provided and the Department’s records.

I. Individual Income Tax – Burden of Proof.

DISCUSSION Taxpayer argues that she reported the income from her three businesses accurately to the Department. The Department based its adjustment and assessment on the grounds that Taxpayer did not provide sufficient documentation to support the claimed Schedule C income. 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 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 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 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. IC 6-8.1-5-4(a) requires that “[e]very person subject to a listed tax must keep books and records so that the [D]epartment can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records. The records [] include all source documents necessary to determine the tax, including invoices, register tapes, receipts, and canceled checks.” The person also “must allow inspection of the books and records and returns by the [D]epartment or its authorized agents at all reasonable times.” IC 6-8.1-5-4(c). The Department asked Taxpayer to verify her income from three different sources: online sales, house cleaning, and independent contractor work. Taxpayer did not claim any expenses, so Taxpayer needed only to verify that she reported her income accurately. Taxpayer submitted canceled checks, contemporaneous ledgers showing dates she worked and the income she earned on those dates, and a printout from the website where she sold goods. The Department agrees that Taxpayer has carried her burden to show that she accurately reported her income from cleaning houses and working as an independent contractor. However, the Department cannot agree that Taxpayer accurately reported her income from online sales. The printout Taxpayer provided shows that the number she reported was actually her selling costs, not her net sales number. Taxpayer’s actual net sales were $2,168, not $1,054 as originally reported. Taxpayer showed that she accurately reported income from two of her personal businesses on her federal Schedule C forms under I.R.C. § 62 and IC 6-8.1-5-4. However, Taxpayer did misreport her income from online sales. The Department will recalculate her taxes owed, including her Indiana Earned Income Credit, using the proper figures and allowing all Schedule C income as detailed in this Letter of Findings. FINDING Taxpayer’s protest is sustained to the extent that the Department will recalculate her tax owed using the correct figures. May 30, 2025 Replaces Finding Document: New