DEPARTMENT OF STATE REVENUE
Letter of Findings: 02-20120224P
Corporate and Individual Income Tax
For the Years 2007, 2008, and 2009
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 It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register.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 the document will provide the general public with information about the Department's official position concerning a specific issue.
I. Tax Administration – Underpayment Penalty.
Authority: IC § 6-3-4-4.1.
Taxpayers protest the imposition of the underpayment penalty and negligence penalty.
STATEMENT OF FACTS
Taxpayer is a New York company that does business in Indiana. Pursuant to an audit, the Indiana Department of Revenue ("Department") assessed Taxpayer additional income tax, interest, as well as underpayment penalty as a result of the audit. Taxpayer protested the underpayment penalty. A hearing was held. This Letter of Findings ensues. Additional facts will be provided as necessary.
I. Tax Administration – Underpayment Penalty.
Taxpayer protests the imposition of the underpayment penalty. The Department imposed an underpayment penalty because Taxpayer failed to remit the required estimate of adjusted gross income tax owed pursuant to IC § 6-3-4-4.1.
IC § 6-3-4-4.1, in pertinent part, states:
(a) Any individual required by the Internal Revenue Code to file estimated tax returns and to make payments on account of such estimated tax shall file estimated tax returns and make payments of the tax imposed by this article to the department at the time or times and in the installments as provided by Section 6654 of the Internal Revenue Code. However, the following apply to estimated tax returns filed and payments made under this subsection:
(1) In applying Section 6654 of the Internal Revenue Code for the purposes of this article, "estimated tax" means the amount which the individual estimates as the amount of the adjusted gross income tax imposed by this article for the taxable year, minus the amount which the individual estimates as the sum of any credits against the tax provided by IC 6-3-3
(b) Every individual who has adjusted gross income subject to the tax imposed by this article and from which tax is not withheld under the requirements of section 8 [IC 6-3-4-8
] of this chapter shall make a declaration of estimated tax for the taxable year. However, no such declaration shall be required if the estimated tax can reasonably be expected to be less than one thousand dollars ($1,000). In the case of an underpayment of the estimated tax as provided in Section 6654 of the Internal Revenue Code, there shall be added to the tax a penalty in an amount prescribed by IC 6-8.1-10-2.1
(c) Every corporation subject to the adjusted gross income tax liability imposed by this article shall be required to report and pay an estimated tax equal to the lesser of:
(1) twenty-five percent (25[percent]) of such corporation's estimated adjusted gross income tax liability for the taxable year; or
(2) the annualized income installment calculated in the manner provided by Section 6655(e) of the Internal Revenue Code as applied to the corporation's liability for adjusted gross income tax.
A taxpayer who uses a taxable year that ends on December 31 shall file the taxpayer's estimated adjusted gross income tax returns and pay the tax to the department on or before April 20, June 20, September 20, and December 20 of the taxable year. If a taxpayer uses a taxable year that does not end on December 31, the due dates for filing estimated adjusted gross income tax returns and paying the tax are on or before the twentieth day of the fourth, sixth, ninth, and twelfth months of the taxpayer's taxable year. The department shall prescribe the manner and forms for such reporting and payment.
(d) The penalty prescribed by IC 6-8.1-10-2.1
(b) shall be assessed by the department on corporations failing to make payments as required in subsection (c) or (f). However, no penalty shall be assessed as to any estimated payments of adjusted gross income tax which equal or exceed:
(1) the annualized income installment calculated under subsection (c); or
(2) twenty-five percent (25[percent]) of the final tax liability for the taxpayer's previous taxable year.
In addition, the penalty as to any underpayment of tax on an estimated return shall only be assessed on the difference between the actual amount paid by the corporation on such estimated return and twenty-five percent (25%) of the corporation's final adjusted gross income tax liability for such taxable year.
Taxpayer has provided sufficient documentation demonstrating that the imposition of the underpayment penalty is not appropriate.
Taxpayer's protest on the underpayment penalty is sustained.
Posted: 09/26/2012 by Legislative Services Agency
Composed: Dec 19,2014 4:17:21PM EST
version of this document.