in-20260729-IR-045260224NRA: LETTER OF FINDINGS: 01-20242005

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242005 Individual Indiana Income Tax For The Year 2022 HOLDING Taxpayer met her burden of proof showing the Department’s assessment was incorrect. ISSUE

I. Indiana Individual Income Tax – Assessment.

Authority: I.R.C. § 61; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3.1-21-6; 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); Treas. Reg. § 1.162-17; About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), Internal Revenue Service; Schedule C, Indiana Department of Revenue,  Internal Revenue Service, Publication 535: Business Expenses (2022). Taxpayer protests the assessment of additional individual income tax for tax year 2022. STATEMENT OF FACTS Taxpayer is an Indiana resident. For tax year 2022, Taxpayer filed her Indiana Full-Year Resident Individual Income Tax Return (“Form IT-40”). After review, the Indiana Department of Revenue (“Department”) issued a Notice of Proposed Assessment. Taxpayer disagreed with the assessment and submitted a protest. An administrative hearing was scheduled, but Taxpayer did not appear. However, Taxpayer did immediately send in documents for the Department to review. This Letter of Findings is written in reliance on the information provided by the Taxpayer and the Department’s records. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax – Assessment.

DISCUSSION The Department reviewed Taxpayer’s Form IT-40 for tax year 2022 and disallowed Taxpayer’s Earned Income Credit. The adjustment resulted in a proposed assessment. Taxpayer protested the assessment and provided documentation in support of her protest. 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 is presumed valid. A taxpayer must provide documentation explaining and supporting 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). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. In addition, Indiana imposes an adjusted gross income tax on all residents. IC 6-3-2-1. An Indiana resident taxpayer’s income is determined by starting with the federal adjusted gross income and making certain adjustments. IC 6-3-1-3.5. The Indiana statute refers to the Internal Revenue Code to compute what is considered the taxpayer’s Indiana income tax. I.R.C. § 61(a) provides that gross income includes “all income from whatever source derived[.]” Thus, for both federal and Indiana income tax purposes, profits attributable to the taxpayer’s trade or business reported on Schedule C are income subject to income tax pursuant to I.R.C. § 61. The Earned Income Tax Credit (“EIC”) is an amount a taxpayer claims on his or her tax return to reduce the amount of income tax owed. An EIC is a tax credit for certain taxpayers who work and have earned income under $63,398. IRS Publication 596, Earned Income Credit (EIC) (2022), https://www.irs.gov/pub/irs-prior/p596--2022.pdf (last visited May 14, 2026). Earned income includes but is not limited to wages, salaries, tips, other taxable employee pay, net earnings from self-employment, and gross income received as a statutory employee. Id., page 4. Generally, a taxpayer who is eligible for a federal EIC is eligible for an Indiana EIC equal to ten percent of the amount of the federal EIC. IC 6-3.1-21-6. A review of the Department’s records show the Department requested information related to Taxpayer’s Schedule C in the form of receipts, invoices, etc. Taxpayer’s return included EIC. The Department adjusted Taxpayer’s tax return and disallowed the EIC in full. The adjustment resulted in an assessment for additional Indiana income tax. During its review, the Department also requested information related to Taxpayer’s Schedule C. Documentation provided during the protest review shows that Taxpayer is entitled to the reported EIC. Based on the documentation provided, Taxpayer has met the burden imposed under IC 6-8.1-5-1(c) of proving the proposed assessment was wrong. FINDING Taxpayer’s protest is sustained. May 29, 2026 Replaces Finding Document: New