in-20250730-IR-045250357NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241880 Individual Income Tax For the 2022 Tax Year HOLDING Married couple carried their burden to show that they reported their Schedule C income accurately. 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). Taxpayers protest the assessment of additional Indiana income tax. STATEMENT OF FACTS Taxpayers are husband and wife. They are Indiana residents who regularly file returns with the Indiana Department of Revenue (“Department”). Taxpayers reported income from two businesses on their 2022 federal Schedule C forms. The Department adjusted their taxable income because Taxpayers had not substantiated the revenues and expenses reported on their Schedule C forms. The Department issued a Notice of Proposed Assessment accordingly. Taxpayers timely protested, and this Letter of Findings results. Because Taxpayers waived their right to a hearing, this Letter of Findings relies on documents that Taxpayers provided and the Department’s records.

I. Individual Income Tax – Burden of Proof.

DISCUSSION Taxpayers argue that they reported the income from their businesses accurately to the Department. The Department based its assessment on the grounds that Taxpayers had not provided sufficient support for the expenses reported on their return. 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 Taxpayers to verify their revenue and expenses from Husband’s business as a van driver and Wife’s business as an online seller. Taxpayers provided online statements, a Form 1099-K issued by an online marketplace, and contemporaneous ledgers to substantiate the revenue from the two businesses. Taxpayers submitted mileage logs, invoices, and statements of fees charged by the online marketplace to substantiate their expenses. The Department agrees that Taxpayers have carried their burden under IC 6-8.1-5-1(c) to show that the Department’s assessment was incorrect and that they originally reported their income accurately under I.R.C. § 62 and IC 6-8.1-5-4. FINDING Taxpayer’s protest is sustained. May 30, 2025 Replaces Finding Document: New