in-20260729-IR-045260227NRA: LETTER OF FINDINGS: 01-20242763

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242763 Individual Income Tax For The Year 2023 HOLDING Individual failed to prove the Department’s assessment was incorrect. ISSUE

I. Individual Income Tax – Assessment.

Authority: IRC § 61; IRC § 62; IRC § 408; IRC § 6654; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-4-4.1; IC 6-3-4-15.7; 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); Clifford R. Eibeck v. Indiana Dept. of State Revenue, 799 N.E.2d 1212 (Ind. Tax Ct. 2003); 45 IAC 3.1-1-21; Income Tax Information Bulletin 3 (March 2023). Taxpayer protests the Department’s assessment of additional individual income tax. STATEMENT OF FACTS In tax year 2023, Taxpayer filed an Indiana Full-Year Resident Individual Return (“Form IT-40”). After review, the Indiana Department of Revenue (“Department”) determined Taxpayer owed additional individual income tax and issued an assessment. Taxpayer filed a protest. An administrative hearing was held. This Letter of Findings is based on information provided by Taxpayer during the protest and a review of the Department’s records. Additional facts will be provided as necessary.

I. Individual Income Tax – Assessment.

DISCUSSION In tax year 2023, Taxpayer filed Form IT-40. The Department reviewed her return and made adjustments related to state and local withholding. Taxpayer disagreed with the assessment and initiated a protest. 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), “[t]he notice of proposed assessment is prima facie evidence that the [D]epartment’s claim for the unpaid tax is valid . . . [t]he 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). 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 6-3-1-3.5(a) provides the starting point in determining the taxpayer’s taxable income and calculating what would be their Indiana income tax after applying any particular additions and subtractions. The statute provides in part that Indiana adjusted gross income starts with “‘adjusted gross income’ (as defined in Section 62 of the Internal Revenue Code) . . . ” Id. According to the IRC § 408(d) (1) “ . . . [e]xcept as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distribute . . . ” IRC § 62 defines adjusted gross income as gross income minus certain deductions which are enumerated under IRC § 62. I.R.C. § 61 defines gross income as “all income from whatever source derived . . . ” IRC § 408 notes that, “[e]xcept as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee . . . ”. Distributions from retirement and pension accounts count as income and are subject to income tax. Clifford R. Eibeck v. Indiana Dept. of State Revenue, 799 N.E.2d 1212, 1213 (Ind. Tax Ct. 2003). Because the retirement and pension distributions count as taxable income, Taxpayer owes income tax on the distributed amounts. When receiving distributions from retirement or pension accounts, IC 6-3-4-15.7(a) states: The Department reviewed Taxpayer’s Form IT-40 and determined that state and local taxes were not withheld from retirement and/or pension distributions received by Taxpayer. During the administrative hearing, Taxpayer acknowledged that she received income from four distributions made up from a mix of retirement account(s) and pension account(s). The 1099s reflected that state or local income taxes were not withheld. Additionally, Taxpayer attempted to correct the issue by filing an amended return; however, Taxpayer incorrectly listed the payment amount due from her original return as an estimated payment on Form IT-40 Schedule 5, line 4. In certain circumstances, a taxpayer is required to make estimated payments on Indiana income tax liability. IRC § 6654; IC 6-3-4-4.1(a). Estimated income tax payments for a taxable year must be made by an individual who: (1) Receives income from which Indiana adjusted gross income tax or local income tax is not properly withheld; and (2) Has a total unpaid state and local income tax liability that is $1,000 or more for the taxable year. Even if an individual does not meet these requirements, the individual may still make estimated payments to reduce the amount that will be due when the annual individual adjusted gross income tax return is filed. Income Tax Information Bulletin 3 (March 2023), 20231227-IR-045230805NRA. In this instance, Taxpayer was not making estimated payments per IC 6-3-4-4.1 and instead noted a prior tax payment on the incorrect line of the amended return. In sum, Taxpayer owed state and local income tax on distributions, because these amounts were not withheld on her behalf. Payments submitted by Taxpayer were not estimated payments. Pursuant to IC 6-3-4-15.7, Taxpayer may have taxes withheld from distributions in the future as long as she complies with the statutory requirements. Because Taxpayer has remitted the amount owed for tax year 2023, this tax year is now reconciled. However, Taxpayer has not shown that the Department’s assessment was incorrect. Taxpayer’s protest is therefore denied. FINDING Taxpayer’s protest is denied. May 29, 2026 Replaces Finding Document: New