20080730-IR-045080558NRA Letter of Findings Number: 08-0102P Partnership Withholding Tax-Penalty For the Years 2003-2005

DEPARTMENT OF STATE REVENUE

02-20080102P.LOF

Letter of Findings Number: 08-0102P

Partnership Withholding Tax-Penalty

For the Years 2003-2005

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 It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register.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–Penalty.

Authority: IC § 6-8.1-10-2.1; 45 IAC 15-11-2.

Taxpayer protests the imposition of the ten percent negligence penalty for failure to pay withholding tax on behalf of its nonresident partners.

STATEMENT OF FACTS

Taxpayer is a partnership doing business in Indiana. Taxpayer filed a partnership tax return; however, Taxpayer failed to withhold on behalf of its partners. The Indiana Department of Revenue ("Department") assessed additional tax, interest, and negligence penalties. Taxpayer protested only the penalties.

I. Tax Administration–Penalty.

DISCUSSION

Taxpayer protests the imposition of the ten percent negligence penalty on Taxpayer's failure to pay nonresident withholding tax on behalf of its partners.

Penalty waiver is permitted if the taxpayer shows that the failure to pay the full amount of the tax was due to reasonable cause and not due to willful neglect. IC § 6-8.1-10-2.1. The Indiana Administrative Code, 45 IAC 15-11-2 further provides:

(b) "Negligence" on behalf of a taxpayer is defined as the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer. Negligence would result from a taxpayer's carelessness, thoughtlessness, disregard or inattention to duties placed upon the taxpayer by the Indiana Code or department regulations. Ignorance of the listed tax laws, rules and/or regulations is treated as negligence. Further, failure to read and follow instructions provided by the department is treated as negligence. Negligence shall be determined on a case by case basis according to the facts and circumstances of each taxpayer.

(c) The department shall waive the negligence penalty imposed under IC 6-8.1-10-1 if the taxpayer affirmatively establishes that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence. In order to establish reasonable cause, the taxpayer must demonstrate that it exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed under this section. Factors which may be considered in determining reasonable cause include, but are not limited to:

(1) the nature of the tax involved;

(2) judicial precedents set by Indiana courts;

(3) judicial precedents established in jurisdictions outside Indiana;

(4) published department instructions, information bulletins, letters of findings, rulings, letters of advice, etc.;

(5) previous audits or letters of findings concerning the issue and taxpayer involved in the penalty assessment.

Reasonable cause is a fact sensitive question and thus will be dealt with according to the particular facts and circumstances of each case.

Taxpayer protests that it was its accountant's error rather than its error that resulted in the failure to withhold. However, the actions of an agent–the accountant–are imputed to the principal–Taxpayer. The agent's error constituted negligence, and this negligence is imputed to Taxpayer. Taxpayer has not otherwise provided sufficient information to conclude that it acted with reasonable cause.

FINDING

Taxpayer's protest is denied.

Posted: 07/30/2008 by Legislative Services Agency

DIN: 20080730-IR-045080558NRA

Composed: Nov 01,2016 12:26:01AM EDT

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