Indiana follows IRS rules governing what qualifies as a business versus a hobby. If you are not engaged in business with a primary purpose of income or profit, IRS rules may limit your ability to take losses. Those limitations may also affect your Indiana return.
Schedule C
DOR reviews the federal Schedule C for accuracy as it impacts Line 1 of the Indiana return.
DOR may send you a letter requesting proof of invoices paid, receipts, bank statements, and canceled checks to validate your return. You will need to complete the income and expense: part one, line 1 is income; part two, lines 8-27 are expense categories.
Send requested documentation on INTIME. Further adjustments to your Schedule C may cause processing delays. Your return can’t be processed until documentation is submitted and reviewed, or until the due date provided on your letter.
Find examples of acceptable documents from the IRS. DOR does not accept spreadsheets or QuickBooks as sole proof of income or expenses.
This video, checklist, and documents are available to assist if there are questions regarding DOR’s request.
Form 2106
DOR reviews the federal Form 2106 for accuracy as it impacts Line 1 of the Indiana return.
DOR may send you a letter requesting:
- Proof of job and related business expenses not reimbursed by your employer
- All income statements (e.g., 1099 (MISC, NEC, R, K)), K-1, and/or W-2 or W-2G forms
- Your Federal (1040) return(s) and all supporting schedules filed with the IRS
Send requested documentation on INTIME. Your return can’t be processed until documentation is submitted and reviewed, or until the due date provided on your letter.
This video explains the documents needed and how to submit them.