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Volume 11 No. 2

e-File Coordinator

While the IRS no longer offers workshops on the Federal/State e-File program, an e-File coordinator is available to provide assistance for software developers and tax preparers. For more information, e-mail Jean Bang at jbang@dor.in.gov

EFT Filers and the WH-1

Beginning Jan. 1, 2009, a new state law will go into effect for all businesses that withhold and pay income tax to the State of Indiana on behalf of their employees. This new law requires that businesses report all  total withholding taxes by county. This law is intended to ensure more timely and accurate payment of county income-tax revenue to local governments.

A new batch of WH-1 forms will be mailed to you in January 2009. Taxpayers must use these forms to report their total withholding taxes monthly by county, along with making their monthly tax payments.

Change for EFT Filers
Those businesses that have filed via electronic-funds transfer (EFT) in the past will now need to file a WH-1 monthly and by county detail, along with making monthly tax payments. The first return is due Feb. 20, 2009.

File WH-1 Forms Electronically
Business taxpayers may also use INtax, the state’s free and convenient online business-tax payment system to report and pay state and county withholding taxes – in addition to other business-tax payments, such as sales tax.

Payroll providers, tax preparers and businesses that have knowledge of XML format may also choose to use our new file-upload method, which enables you to file multiple (or bulk) returns. We strongly encourage those with XML knowledge to use this method. For instructions on how to use the Department’s file-upload system, please visit www.in.gov/dor/4002.htm

Please note that those businesses, providers and preparers who chose to file their WH-1 returns electronically should not file paper WH-1 returns for the same reporting period. Doing so will result in duplicate returns, and could prompt double billings and penalties. In addition, those filing WH-1 returns electronically should also file their WH-3 Withholding Reconciliation Reports and Supporting Wage Statements electronically as well. These reporting processes have similar requirements and certifications.

For more information about the change in filing your WH-1 return, please call (317) 233- 4015.

Individual Tax Changes

The 2008 IT-40 hits the Web on Dec. 1, and print copies will ship out the last week of December.

Once again, counties will have until Dec. 31 to adopt or change county tax. But expect to see several changes for this year’s individual filings, including:

  1. The renter’s deduction has increased from $2,500 to $3,000.
  2. The military service deduction has increased from $2,000 to $5,000 per person.
  3. New National Guard and reserve component members deduction (military income received after Indiana National Guard/reserves called up for involuntary active duty is exempt).
  4. The carryover credit (to next year’s estimated tax account) is limited to the amount of overpayment (may not be increased by a remittance).
  5. Schedules 3, 3A, F and F1 will no longer be used.
  6. Forms/schedules will have a 1-D barcode.
  7. Forms/schedules are no longer to be stapled or paper clipped due to new imaging requirements.

Corporate Tax Changes

  • Are permitted to use the annualized income installment method to figure a penalty or exception for the underpayment of estimated tax.
  • Must add back any deduction for dividends paid to share­holders of a captive real estate investment trust.
  • Will use the second year phased-in single-factor sales formula for apportionment of income.

New Corporate and Individual Credits/Exemptions

  • Qualified patents exemption (income received from a utility or plant patent) available for both corporations and individuals.
  • Media production expenditure refundable credit (available based on the production of movies, TV series, videos, etc. in Indiana) available for both corporations and individuals.
  • Composite filer refundable credit available on Form IT-40PNR for certain individual nonresidents who are members of partnerships/S corporations and have any other Indiana-source income.

e-File Mandate

If a professional tax preparer files more than 100 tax returns for individuals in a calendar year, he or she must electronically file those returns. Effective Jan. 1, 2011, a penalty of $50 will be imposed for each return that is not filed electronically with a maximum annual penalty of $25, 000.

The exception to this e-File mandate is when individuals opt-out of the requirement to have their return electronically filed. Each individual opting out must sign and file Form IN-OPT; the preparer is then required to keep this on file and indicate the opt-out on the individual’s return.

Please note that the Department will not require you to electronically file the IT-40PNR or IT-40RNR for the 2009 filing tax season.

For previous editions of the Tax Dispatch, click here.

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