in-20250730-IR-045250358NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242168 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; 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); IT-40 Full-Year Resident Individual Income Tax Booklet (2023). Taxpayer protests the assessment of additional individual income tax. STATEMENT OF FACTS Taxpayer is an Indiana resident.  For tax year 2023, Taxpayer timely filed his Form IT-40 Individual Income Tax Return. On the return, he reported state and local taxes withheld by his employer. The Indiana Department of Revenue (“Department”) reviewed Taxpayer’s return and determined the withholding figures were incorrect based on the W-2 provided. As a result, the Department issued a Notice of Proposed Assessment for additional income tax. Taxpayer protested and requested resolution without a hearing. This Letter of Findings results and is based on information provided by Taxpayer and 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 and initiated a protest. In support, Taxpayer provided an explanation of what he believed occurred along with copies of his individual tax return and complete W-2. 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). Indiana allows credit for state and county taxes withheld on a taxpayer’s behalf. IT-40 Full-Year Resident Individual Income Tax Booklet (2023). State and county taxes are reported on separate lines on the return. Id. A taxpayer is directed to complete Schedule IN-W and provide copies of his/her W-2, W-2G, 1099, Form IN MSID-A, and/or Schedule IN K-1. Id. When Taxpayer filed his Form IT-40 Individual Income Tax Return, he calculated a withholding tax credit of approximately $7,300 for both state and local taxes.  When the Department reviewed the return, it determined the correct withholding tax amount was approximately $4,400.  In his protest submission, Taxpayer stated he thought the income discrepancy was caused by a corrected 1099-SA related to a health savings account. A review of Taxpayer’s Form IT-40 Individual Income Tax Return and his W-2 show the Department’s review and subsequent assessment was correct. Taxpayer’s W-2 consists of two pages with various boxes related to Taxpayer’s wages. On the first page, his employer noted the amount of state income tax withheld was approximately $2,900 while the amount of local income tax withheld was approximately $1,500. On the second page, the state income tax withheld consists of the same $2,900 amount with one box containing a local income tax amount of approximately $1,100 withheld and another box showing approximately $400 withheld. Adding the $1,100 and $400 of withholding together totals the $1,500 amount from the first page of the W-2.  It appears Taxpayer accidentally doubled the state withholding of $2,900 when he completed his Form IT-40 because that amount doubled added to the local income tax amount totals $7,300 on the return. Unfortunately, this was incorrect. Taxpayer’s employer only withheld $2,900 in state income tax and $1,500 for local income tax, totaling $4,400. This is the dollar amount Taxpayer should have calculated on Schedule 5, which is then transferred to Line 12 of the Form IT-40. By accidentally doubling the amount of his state withholding, Taxpayer ultimately miscalculated the total amount of credit available to him. When Taxpayer remitted payment for taxes owed in 2023, he paid less tax than what was due because of the calculation error. Taxpayer has not shown that the Department’s assessment was incorrect under IC 6-8.1-5-1. FINDING Taxpayer’s protest is denied. May 2, 2025 Replaces Finding Document: New