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DOR's Back on Track Plan
As a result of the COVID-19 pandemic, DOR suspended and altered several programs and
procedures to provide relief for Hoosiers. Starting in July 2020, DOR is working to return to
normal operations. Starting in January 2021, all tax deadlines will return to their normal schedule.
The document below outlines changes for the 2020 tax season.
DOR's Offices Are Open, Appointments Required for Some Services
DOR is now accepting walk-in customers at all locations.
Appointments are required to open new IRP or IFTA accounts through Motor Carrier Services (MCS). Walk-in service for other motor carrier transactions is available during normal business hours at MCS. Appointments are highly recommended for reduced wait times at DOR district offices. Additionally, customers are strongly encouraged to call DOR customer service to see if their question(s) can be answered by one of our expert customer service representatives first. Masks are required at all locations.
Frequently Asked Questions
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed on March 27, 2020 and was one of the largest economic bills in history. It authorized more than $2 trillion to battle COVID-19 and its economic effects, including providing corporation relief, loan programs for small businesses, individual relief, support for medical providers, and various types of economic relief across businesses and industries.
In December 2020, Congress passed a federal budget, which included significant second stimulus package provisions. The second stimulus package authorized $900 billion for the same purposes as the CARES Act. This package is tied to a $1.4 trillion resolution to fund the federal government through September 2021.
On April 22, the Indiana General Assembly did not adopt certain provisions of the current Internal Revenue Code and Governor Eric Holcomb signed this into law on April 29. Income Tax Information Bulletin #119 contains detailed information regarding Internal Revenue Code provisions not followed by Indiana and clarifies of related issues. Specific information regarding Indiana’s tax treatment of federal COVID-19 provisions is available through DOR’s Tax Library. Customers with questions regarding unemployment income, should refer to DOR’s “Unemployment Benefits and Taxes” page.
- Who is eligible for the deferral and waiver of penalty and interest?
Individuals and corporations were both eligible for the deferral of penalty and interest from March to July. That deferral and waiver period expired on July 15, 2020. Individual estimated payments originally due on June 15, 2020 are now due on or before July 15, 2020.
All other tax return filings and payment due dates remain unchanged.
- What taxes are included in the deferral and waiver of penalty and interest?
The deferral and waiver of penalty and interest extended to only certain individual and corporate filing and payments. Unpaid income and franchise taxes due on or after April 1, 2020, and before July 15, 2020, did not accrue interest or penalties until July 16, 2020 and unpaid pass-through withholding taxes due on or after April 1, 2020, and before July 15, 2020, did not accrue interest or penalties until August 18, 2020. This applies to all persons whose original or extended federal income tax return filing deadline is extended as a result of the IRS notices.
- Does this apply to returns or just payments due?
Yes, this applies to returns and payments due.
- I opted out of paying the withholding tax on my employees' salaries. Do I still have an obligation to pay Indiana withholding taxes?
The presidential memorandum regarding employers’ withholding obligation does not apply to any taxes due to Indiana. Employers and other withholding agents should continue withholding and remitting for all taxes required under Indiana law such as wages, gambling winnings, and non-resident shareholders/partners. Employees should contact their individual employer or the IRS regarding these federal-only withholding payroll tax changes.
- What do I do if I don't have power of attorney (POA) on file with my client in the state of Indiana, but do have a Federal power of attorney?
Due to the COVID-19 outbreak, DOR will accept a Federal power of attorney (POA) to serve temporarily as the Indiana POA until further notice in certain circumstances:
- The tax/form type on the Federal POA matches or is similar to the Indiana tax/form for which the person seeks to represent the client;
- The requested representation is only for non-legal matters. (Any temporary acceptance of the Federal POA would not extend to protests of assessments or refund denial matters.); and
- The Federal POA was executed on or before March 6, 2020 (when Governor Holcomb issued Executive Order 20-02, decreeing a public health emergency).
- Are property tax payment deadlines extended?
Property taxes are not usually handled by DOR. Taxpayers are encouraged to reach out to their county, city, or the Indiana Department of Local Government Finance on the status of their property taxes.
- Does the filing and payment extension affect the deadline for filing amended returns and requesting refunds for previous income tax years?
The deadline for filing a claim for refund of income tax that was set to expire between April 1, 2020 and July 14, 2020 was extended to July 15, 2020, including refunds of withholding or estimated tax paid in 2016. All other refund deadlines before April 1, 2020 and after July 14, 2020, remain unchanged.
As of December 2020, all tax types are back to their normally scheduled due dates. The dates that had been extended are now due as normal.
- Does the due date extension apply to previously extended returns?
Yes, the due date extension applied to previously extended returns.
- If my business receives a federal Paycheck Protection Program (PPP) loan that is later forgiven and excluded from gross income for federal income tax purposes under section 1106 of the federal CARES Act, will that income tax exclusion also apply for Indiana income tax purposes?
Indiana conforms to provisions of the Internal Revenue Code (IRC) as of a specific date – currently that date is January 1, 2020. The CARES Act was signed into law on March 27, 2020; therefore, none of the changes made to IRC under the CARES Act currently flow through to Indiana.
The CARES Act provided that if debt from a PPP loan was forgiven, those loan proceeds would not be included in the borrower’s taxable income. Because the debt forgiveness exclusion under section 1106 of the CARES Act was inserted into the Small Business Administration portion of federal code and is not part of IRC, our position is that Indiana would automatically follow on the inclusion/exclusion without updating the conformity date to the current IRC. If the loan is forgiven, the canceled indebtedness resulting from Section 1106 would not be included in the borrowers’ taxable income, and that treatment would flow through to Indiana as well, unless the General Assembly chooses otherwise during the 2021 legislative session.
In December 2020, Congress passed a second stimulus package in conjunction with the federal budget bill. Similar to the CARES Act, the bill sections do not appear to change any IRC provisions, but made several non-code changes with regard to PPP loans and deductibility of expenses paid for with the PPP proceeds.
Following the passage of the CARES Act, the IRS had indicated that deductions would be disallowed for otherwise deductible expenses that were paid with the PPP loan proceeds if the underlying loan was forgiven or was reasonably expected to be forgiven. However, under the second stimulus package that is no longer the case and deductions will be allowed in addition to loan forgiveness for PPP loan recipients. This provision of extraordinary deductions is not located within IRC and thus Indiana’s position is that the deductibility would flow through without recoupling to the current IRC. Expenses paid for with the PPP loan will be fully deductible by the business. It is likely that this treatment will flow through to Indiana as well, unless the General Assembly chooses otherwise during the 2021 legislative session.
The second stimulus package also made several non-code changes with regards to loans given to partnerships and S-corporations for COVID-19 reasons. The loan amount shall be treated as tax exempt income and any expenses paid for by the loan will be fully-deductible. This treatment will change the adjusted basis of partners. Any increase to the adjusted basis of a partner’s interest in a partnership due to the excluded loan will equal the partner’s distributive share of deductions for the expenses paid for with the loan. Similar rules apply to S corporations and their shareholders.
- How will Indiana treat COVID-19 Economic Injury Disaster Loans (EIDL)?
EIDL will be treated in a manner similar to PPP loan forgiveness and PPP associated expenses.
- Will the federal COVID-19 economic impact payments be taxable in Indiana?
The economic impact payments, otherwise known as stimulus payments, are not considered income at the federal level and also would not be treated as income by Indiana.
IRS and Small Business Administration guidance state that economic impact payments are to be treated as an advanced refundable tax credit and will not count as taxable income at the federal level. IRS 2020 instructions have yet to be released on how taxpayers will report the economic impact payment on their 2020 federal tax return.
- Will the presence of employees temporarily telecommuting from within Indiana solely as a result of states of emergency declared in response to COVID-19 establish Indiana income tax nexus for a business that does not otherwise have nexus in this state?
In response to the new remote work requirements associated with the COVID-19 pandemic, DOR will not use someone’s relocation, that is the direct result of temporary remote work requirements arising from and during the COVID-19 pandemic health crisis, as the basis for establishing Indiana nexus or for exceeding the protections provided by P.L. 86-272 for the employer of the temporary relocated employee.
The temporary protections provided under this guidance will extend for periods of time where:
- There is an official work from home order issued by an applicable federal, state or local governmental unit, or
- Pursuant to the order of a physician in relation to the COVID-19 outbreak or due to an actual diagnosis of COVID-19,
plus 14 days to allow for return to normal work locations.
If the person remains in Indiana after the temporary remote work requirement has ended, nexus may be established for that employer. Likewise, an employer may not assert that solely having a temporarily relocated employee in Indiana under the circumstances described above creates nexus for the business or exceeds the protections of P.L. 86-272 for the employer.
- How will Indiana address the individual charitable above-the-line- deduction in the CARES package?
Currently, Indiana is not conformed to the CARES Act due to static conformity to the Internal Revenue Code as of 1/1/2020. Pending legislative action in the 2021 General Assembly, this deduction will not be available at the state level but will be used when calculating an individual’s starting adjusted gross income for state taxation purposes. At this time, any add-back deduction taken for federal purpose using Code 120 on the IT-40 or IT-40PNR.
- How will the net operating losses provisions in the CARES Act impact my 2020 state tax return?
In the 2018 legislative session, Indiana decoupled from the federal Tax Cuts and Jobs Act of 2017's changes to the treatment of net operating losses (NOL). Indiana retains the previous treatment of NOLs, which allows these losses to be used against 100% of Indiana adjusted gross income in a given year for a period of up to 20 years. In addition, Indiana has specifically decoupled from any carryback allowance otherwise permitted under federal law.
Estimated Income Payments
- Does the filing and payment extension apply to required estimated income tax payments?
The deadline for corporate estimated payments due on April 20, May 20, or June 22, 2020 were due on or before July 15, 2020. As a result of the extensions for estimated payments, for Individual and Corporate filers who file on a calendar year basis this means that the first estimated payment, normally due in April, will now be due after the second estimated payment remained due in June.
- Are income tax estimated payments still required to be made by their regular due date?
As a result of the extensions for estimated payments, Individual and Corporate filers who file on a calendar year basis, will have the usual first estimated payment, normally due in April 2020, due after the second estimated payment which remained due in June 2020.
Specific to Corporations
- What relief is available if I believe my income for tax year 2020 will vary substantially between different quarters because of economic disruptions caused by COVID-19?
There is an allowance for estimated payments to be made on annualized basis. This may provide relief at this time for businesses who believe their income for tax year 2020 will vary substantially between different quarters because of economic disruptions caused by COVID-19 and wish to avoid the penalties for insufficient estimated payments.
- What if I cannot pay my quarterly estimates because of economic hardship caused by COVID-19?
If your business has closed, a return must be filed even when no tax is due unless the Indiana tax account has been closed using Form BC-100. If your business is closed temporarily and has no tax revenue for a filing period, you must file a return indicating $0 for that period ($0 return). If a business is permanently closed, an Indiana tax account is no longer needed.
If your business simply cannot pay your quarterly estimates because of economic hardship, please call 317-232-0129. Payment plans are available.
- How will excess business losses be handled because of the CARES Act legislation?
At this time, because Indiana conforms to the Internal Revenue Code as in effect on January 1, 2020, Indiana will continue to follow the pre-2020 treatment of excess business losses. Thus, the excess loss would be disallowed for Indiana purposes but would also be available as a net operating loss (NOL) carryforward starting in the year after loss.
- Have the sales tax return due dates and payment dates been extended?
No. DOR has not extended sales tax return due dates or payment dates. Taxpayers should be paying all sales tax in a timely manner in order to avoid interest and penalties.