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-IR- Database: Indiana Register

DEPARTMENT OF STATE REVENUE
01-20110340P.LOF

Letter of Findings Number: 01-20110340P
Individual Income Tax-Penalty
For the Year 2010


NOTICE: Under IC § 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the Department's official position concerning a specific issue.
ISSUE
I. Tax Administration–Estimated Tax Penalty.
Authority: I.R.C. § 6654; IC § 6-3-4-4.1; IC § 6-8.1-10-2.1; 45 IAC 15-11-2.
Taxpayers protest the imposition of the ten-percent penalty for failure to make sufficient estimated tax payments during the year in question.
STATEMENT OF FACTS
Taxpayers are a married couple filing a joint return and are hereinafter simply referred to as "Taxpayer." Taxpayer filed an individual income tax return for the year in question and paid the total Indiana income tax liability prior to April 15 of the next year. However, the Indiana Department of Revenue ("Department") determined that Taxpayer had not paid sufficient estimated taxes required for the year in question. The Department assessed a ten-percent penalty based on the insufficient estimated tax payments. Taxpayer protested the penalty.
I. Tax Administration–Estimated Tax Penalty.
DISCUSSION
Taxpayer protests the imposition of the ten-percent penalty on Taxpayer's failure to make sufficient estimated tax payments as required pursuant to IC § 6-3-4-4.1, which provides for a ten-percent penalty for failure to make sufficient estimated payments during the tax year.
Under IC § 6-3-4-4.1(a) and (b), a taxpayer was required to make estimated payments equal to a percentage of the current year's Indiana income tax liability or the prior year's Indiana income tax liability if the taxpayer determines that the taxpayer's tax liability not otherwise paid by withholding was greater than $400 (effective for taxable years beginning after December 15, 2007, the amount was increased to $1,000). The percentage requirements for the minimum estimated tax payments are set forth in I.R.C. § 6654(d)(1)(B). The estimated tax payments must be made in four installments, on the dates specified by I.R.C. § 6654(c). Failure to make sufficient estimated tax payments is subject to a ten (10) percent penalty in the amount of the underpayment.
For purposes of this Letter of Findings, it is assumed that estimated tax penalties can be waived under IC § 6-8.1-10-2.1(d) and 45 IAC 15-11-2. However, penalty waiver under IC § 6-8.1-10-2.1(d) and 45 IAC 15-11-2 requires a showing on the part of Taxpayer that Taxpayer acted with ordinary business care with regard to the taxpayer's failure to pay the appropriate taxes.
With regard to the tax year in question, Taxpayer knew the previous year's Indiana income tax liability. Taxpayer could have made estimated payments throughout the tax year, even if the current year's Indiana income tax liability was unknown. By making estimated payments based on the previous year's Indiana income tax liability–a number known to Taxpayer–Taxpayer would not have been subject to the penalty in question. Taxpayer has previously remitted estimated payments and had incurred penalties in prior years for failure to make sufficient estimated tax payments.
Though Taxpayer has provided information relating to their various financial and personal issues that arose during 2010, Taxpayer has not provided sufficient information to justify waiver of penalties that were the result of not making sufficient estimated payments for three quarters during 2010. Thus, Taxpayer has not established reasonable care that could permit potential penalty waiver.
Taxpayer also requested relief from the penalty based on equitable grounds. However, for purposes of this Letter of Findings, the Department must determine the appropriate penalty based on the law and facts as presented.
FINDING
Taxpayer's protest is respectfully denied.

Posted: 11/30/2011 by Legislative Services Agency

DIN: 20111130-IR-045110687NRA
Composed: Apr 16,2014 9:01:55PM EDT
A PDF version of this document.