in-20250528-IR-045250246NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241730 Individual Income Tax For The Year 2020 HOLDING Individuals established that the Department’s assessment of additional individual income tax was overstated but not altogether incorrect. ISSUE

I. Individual Income Tax – Federal Discrepancy.

Authority: I.R.C. § 62; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; Indiana 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). Taxpayers protest the assessment of additional Indiana individual income tax for tax year 2020. STATEMENT OF FACTS Taxpayers are Indiana residents and a married couple. For the 2020 tax year, Taxpayers filed an Indiana Individual income tax return as married filing jointly. Thereafter, the Indiana Department of Revenue (“Department”) determined that there was a discrepancy between Taxpayers’ federally reported adjusted gross income and their adjusted gross income as reported to Indiana. The Department issued an assessment to Taxpayers for additional Indiana individual income tax. Taxpayers protested the assessment. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Individual Income Tax – Federal Discrepancy.

DISCUSSION Taxpayers protest the assessment for additional Indiana individual income tax. In support of their protest, Taxpayers provided their federal Account Transcript, corrected Form 1099-R, and correspondence with the Internal Revenue Service (“IRS”). 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 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 is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Further, “[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. IC 6-3-2-2(a) outlines what is income derived from Indiana sources and subject to Indiana income tax. The starting point for determining Indiana income tax is the taxpayer’s federal adjusted gross income (“FAGI”) as defined in I.R.C. § 62, which taxpayers are directed to enter on their Indiana return before making certain modifications that are outlined in IC 6-3-1-3.5. In reviewing Taxpayers’ documentation, it appears that they initially reported their FAGI as approximately $15,000. Taxpayers provided the Department with correspondence from the IRS, which reflects that the IRS reviewed their account for unreported income for the 2020 tax year. The review resulted in an increase in their FAGI from approximately $15,000 to approximately $68,000. Because a taxpayer’s FAGI is the starting point in determining a taxpayer’s Indiana income tax, the adjustment to Taxpayers’ FAGI on their federal return resulted in their FAGI on their Indiana return being understated. The Department subsequently made an adjustment to Taxpayers’ FAGI on their Indiana individual income tax return to mirror their FAGI as corrected on their federal return, resulting in an assessment for additional tax due on the unreported income. During the hearing, Taxpayers explained that there was an error on their Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (“Form 1099-R”) that caused the discrepancy. In 2020, Taxpayers received a distribution from a financial institution where they have an account. On the original Form 1099-R, the entire distribution was listed as the taxable amount in error. Taxpayers provided a corrected Form 1099-R which reflects that only a small part of the distribution was taxable income. However, Taxpayers failed to include that small amount of the distribution when calculating their FAGI. Taxpayers have met their burden of proving that the Department’s proposed assessment was overstated but not altogether incorrect. FINDING Taxpayers’ protest is sustained to the extent that a review by the Department will result in a reduced assessment. March 19, 2025 Replaces Finding Document at: New