20090930-IR-045090713NRA Letter of Findings Number: 09-0385P Individual Income Tax-Penalty For the Year 2007

DEPARTMENT OF STATE REVENUE

01-20090385P.LOF

Letter of Findings Number: 09-0385P Individual Income Tax-Penalty For the Year 2007

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 It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register.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 not provided a reason for the failure to make estimated payments based on the prior year's Indiana income tax liability, and thus Taxpayer has not established reasonable care that could permit potential penalty waiver.

FINDING

Taxpayer's protest is denied.

Posted: 09/30/2009 by Legislative Services Agency

DIN: 20090930-IR-045090713NRA

Composed: Nov 01,2016 12:43:20AM EDT

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