in-20250730-IR-045250354NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241743 Income Tax For The Year 2020 HOLDING Taxpayer 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). Taxpayer protests the assessment of additional individual income tax. STATEMENT OF FACTS Taxpayer is an Indiana resident and filed Form IT-40 Indiana Full-Year Resident Individual Income Tax Return for tax year 2020.  The Indiana Department of Revenue (“Department”) later received information that Taxpayer’s federal adjusted gross income (“FAGI”) was higher than what was reported on the return.  As a result, the Department determined Taxpayer owed additional individual income tax and issued an assessment. Taxpayer protested, and an administrative hearing was held.  This Letter of Findings results.  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 2020.  Taxpayer disagreed with the assessment and initiated a protest.  In support, Taxpayer provided copies of documents related to a College Choice 529 plan, her 2020 Form IT-40 Individual Income Tax Return, and her federal account transcript. 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).  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). Taxpayer filed her 2020 Form IT-40 and reported a FAGI of approximately $96,000.  The Department later received information showing her FAGI was approximately $104,000.  As a result of the difference, the Department issued an assessment for additional income tax and accrued interest.  During the administrative hearing, Taxpayer explained that she believed the assessment was related to a 2020 contribution to a College Choice 529 plan.  She expressed concern that she was not receiving full credit for the dollar amount deposited in the account in light of the proposed assessment. Finally, Taxpayer recalled being required to pay additional federal income tax sometime after she submitted her federal 2020 tax return; however, she did not recall any other details regarding additional income or federal taxes. A review of the Department’s records and the documents provided by Taxpayer show that her 2020 Form IT-40 reported an incorrect FAGI. The $8,000 difference between what was originally reported and the amount that was reported federally results in several line-item changes on the Form IT-40.  Specifically, Lines 1, 3, and 7 all change due to the increased FAGI.  Further, the amount of local income tax withheld also increases on Line 9 because of the increased FAGI. This results in a different total reported on Lines 11 and 15. Based upon the hearing, it appears Taxpayer did not account for the increased local income tax on the adjusted FAGI. In sum, the Department’s adjustments are correct.  Changing Taxpayer’s FAGI to the correct amount and adjusting the local income tax resulted in an assessment for additional tax.  The Department notes that Taxpayer’s credit related to contributions to a College Choice 529 plan after the Department’s adjustments remains intact.  Taxpayer’s protest is denied. FINDING Taxpayers’ protest is denied. May 5, 2025 Replaces Finding Document: New