in-20260729-IR-045260237NRA: LETTER OF FINDINGS: 03-20231692

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 03-20231692 Withholding Tax For Tax Years 2022 HOLDING Corporation failed to prove the Department’s assessment was incorrect. ISSUE

I. Withholding Tax – Failure to withhold.

Authority: IC 6-3-4-8; IC 6-8.1-5-1; IC 6-8.1-9-1; 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); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); 45 IAC 3.1-1-101. Taxpayer protests the assessment for failing to remit withholding tax. STATEMENT OF FACTS Taxpayer is an Indiana corporation. Taxpayer routinely files monthly withholding tax returns (“WH-1”) along with an annual reconciliation return (“WH-3”) at the end of each tax year. After review, the Department determined there was a discrepancy between Taxpayer’s monthly withholding returns and the annual reconciliation return. The Indiana Department of Revenue (“Department”) issued a proposed assessment for withholding tax plus penalties and interest. An administrative hearing was held. This Letter of Findings results. Additional facts will be provided as necessary.

I. Withholding Tax – Failure to withhold.

DISCUSSION Taxpayer is an Indiana corporation. The Department reviewed Taxpayer’s withholding returns and found that the monthly WH-1 returns did not reconcile with the WH-3 annual reconciliation return. As a result, the Department issued an assessment for additional withholding tax plus penalty and interest. Taxpayer protested the Department’s assessment. In support, Taxpayer provided an explanation and additional information related to its 2022 withholding returns. As a threshold issue, it is taxpayer’s responsibility to establish that the existing tax assessment is incorrect. As stated in IC 6-8.1-5-1(c), “The notice of proposed assessment is prima facie evidence that the department’s claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” 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). Consequently, 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). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference. Under IC 6-3-4-8(a), any employer “making payments of wages subject to tax under [Art. 6-3] . . . is required . . . to withhold, collect, and pay over income tax on wages paid . . . [and] deduct and retain therefrom the amount prescribed in withholding instructions issued by the department.” Generally, an employer shall pay withholding taxes monthly; however, if the average monthly amount of withholding taxes for the previous calendar year does not exceed $1,000, the employer may pay the tax by calendar year instead of monthly filings. IC 6-3-4-8(b). An employer is required to file Form WH-3, the annual reconciliation form, no later than thirty-one days after the end of the calendar year. IC 6-3-4-8(e). The Department reviewed Taxpayer’s withholding returns and found that the monthly WH-1 returns did not reconcile with the WH-3 annual return. As a result, the Department issued an assessment for additional withholding tax plus penalty and interest. At the hearing, Taxpayer explained that its payroll system generates WH-1s and the WH-3 directly from the payroll system, Taxpayer’s owner, who manages payroll, does not manually enter any information in those filings. Despite this methodology, the Department’s review of Taxpayer’s employees’ W-2s revealed a shortfall of withholding tax submitted monthly on Taxpayer’s WH-1s when compared to the withholding amount provided on the WH-3 annual reconciliation return. Taxpayer was unable to provide documentation to explain this discrepancy. As a result, Taxpayer’s protest is denied. Related to the argument discussed above, Taxpayer also believed it had an overpayment stemming from tax year 2018. When Taxpayer contacted the Department regarding the overpayment, the Department informed Taxpayer that any refund request was outside the statute if limitations. “[I]n order to obtain the refund the person must file the claim with the department within three (3) years after the later of the following: (1) The due date of the return; (2) The date of payment.” IC 6-8.1-9-1. Additionally, Taxpayer also believed that a withholding liability from 2019 carried over to subsequent years, and the 2022 assessment was directly related to the liability from tax year 2019. A review of the Department’s records shows that the Taxpayer’s 2019 withholding reconciled, thus there was no 2019 liability to carry over to 2022. In sum, Taxpayer’s withholding accounts for 2022 do not reconcile. Taxpayer did not provide documentation to show the Department’s assessments were incorrect. Any overpayment from 2018 cannot be applied or refunded, because the request was made outside the three-year statute of limitations, and tax year 2019’s withholding returns reconciled. Thus, Taxpayer failed to meet it burden under IC 6-8.1-5-1(c). Taxpayer’s protest is denied. FINDING Taxpayer’s protest is denied. May 28, 2026 Replaces Finding Document: New