in-20250625-IR-045250291NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242141 Individual Income Tax For The Year 2023 HOLDING Individual established that the penalty associated with a proposed assessment should be abated. ISSUE

I. Tax Administration – Penalty Abatement.

Authority: IC 6-3-2-1; IC 6-3-4-1; IC 6-3-4-3; IC 6-8.1-5-1; IC 6-8.1-10-2.1; 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 penalty associated with a proposed assessment. STATEMENT OF FACTS Taxpayer is an Indiana resident who regularly files Indiana income tax returns. Taxpayer is also a part owner of an out-of-state business which requires him to file a Form IT-41 Beneficiary’s Share of Indiana Adjusted Gross Income, Deductions, Modifications, and Credits (“Schedule K-1”). Upon receiving the information needed to complete the Schedule K-1, Taxpayer filed his return with the Indiana Department of Revenue (“Department”). The Department determined that Taxpayer had not timely filed his Indiana Individual Income Tax Return (“Form IT-40”) and issued a notice of proposed assessment including penalty and interest. Taxpayer disagreed with the assessment and submitted a protest to that effect. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Tax Administration – Penalty Abatement.

DISCUSSION Upon receiving Taxpayer’s Form IT-40, the Department determined that Taxpayer had not timely filed his return and issued a Notice of Proposed Assessment including penalty and interest. As a threshold issue, it is a 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 his or her claim 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). Further, “[e]very resident individual having for the taxable year gross income…” shall make a return. IC 6-3-4-1. IC 6-3-4-3 requires returns to be filed on "the 15th day of the fourth month following the close of the tax year." Where a taxpayer “fails to pay the full amount of tax shown on the person’s return on or before the due date for the return or payment[]”, Indiana law requires a ten-percent penalty be imposed on the taxpayer. IC 6-8.1-10-2.1(a)(2). However, “[i]f a person subject to the penalty imposed under this section can show that the failure to…timely remit tax held in trust…was due to reasonable cause and not due to willful neglect, the [D]epartment shall waive the penalty.” Id. During the hearing, Taxpayer explained that there were delays in receiving information necessary to accurately complete his Schedule K-1 from the company for which he is part owner. Taxpayer stated that he did not receive that information until April 15, 2024. He immediately took the information for his return to his tax preparer who then prepared it for filing. Taxpayer stated that they made several attempts to remit payment via Indiana’s electronic tax filing system, but the system would not accept the return. Finally, around 12:45 am on April 16, 2024, Taxpayer stated the return was accepted. Information provided by Taxpayer during the hearing is corroborated by the Department’s records. Taxpayer’s return was due on April 15, 2024, and it was not filed until April 16, 2024. Based on the totality of the circumstances, the Department agrees that Taxpayer’s failure to submit a timely return was due to reasonable cause and not willful neglected. Therefore, the penalty should be abated. FINDING Taxpayer’s protest is sustained. April 9, 2025 Replaces Finding Document: New