in-20260729-IR-045260233NRA: LETTER OF FINDINGS: 01-20251467

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251467 Individual Income Tax For the Year 2021 HOLDING Indiana couple established that the Department’s assessment of additional income tax was incorrect. ISSUE

I. Individual Income Tax – Federal Discrepancy.

Authority: 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); 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); 45 IAC 15-5-1 Taxpayers protested the Department’s assessment of additional income tax. STATEMENT OF FACTS Taxpayers are a married couple filing jointly in Indiana. Taxpayers filed both federal and state income tax returns for tax year 2021, reporting their Social Security benefits on an amended federal return. Taxpayers did not include the Social Security benefits as part of their Adjusted Gross Income (“AGI”) on their Indiana return. The discrepancy in Taxpayers’ AGI between their federal and Indiana income tax returns resulted in the Department’s issuance of a Notice of Proposed Assessment (“NOPA”) to Taxpayers reflecting additional income tax liability. Taxpayers disagreed with the assessment and submitted a protest to that effect. Taxpayers elected to pursue their protest without a hearing. This Letter of Findings is based on the information provided by Taxpayers, information available to the Department, and the tax laws of this state. Additional facts will be provided as necessary.

I. Individual Income Tax – Federal Discrepancy.

DISCUSSION Taxpayers protested the imposition of additional Indiana income tax for the tax year 2021. The Department adjusted Taxpayers’ AGI to match the income Taxpayers reported on their federal return. The increase in Taxpayers’ AGI resulted in additional income tax due. 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). An assessment, including a taxpayer’s penalty assessment, is therefore presumed valid. 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). IC 6-8.1-5-1(b) mandates that “[i]f the department reasonably believes that a person has not reported the proper amount of tax due, the department shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available . . . . ” (Emphasis added); see also 45 IAC 15-5-1. Pursuant to IC 6-3-1-3.5(a)(8), adjusted income is arrived at, in part, by “[s]ubtract[ing] an amount equal to the amount of federal Social Security and Railroad Retirement benefits included in a taxpayer's federal gross income by Section 86 of the Internal Revenue Code.” Taxpayers provided documentation to support that they reported their Social Security benefits on their amended federal income tax return. Pursuant to IC 6-3-1-3.5(a)(8), Taxpayers correctly deducted the Social Security benefits from their federal adjusted gross income. Therefore, Taxpayers have met their burden under IC 6-8.1-5-1(c) establishing the Department’s assessment of additional income tax was incorrect. FINDING Taxpayers’ protest is sustained. May 29, 2026 Replaces Finding Document: New