Revenue Finds that Taxpayer Failed to Submit Sufficient Information to Rebut Department's Estimated Income Tax

Taxpayer is an individual residing in Indiana. Taxpayer operates a sole proprietorship in Indiana.

From 2001 to 2009, Taxpayer did not file Indiana individual income tax returns. The Indiana Department of Revenue ("Department") conducted an investigation of Taxpayer. As a result of the Department's audit, Taxpayer was assessed tax, interest, and a ten-percent negligence penalty for each of the years in question. Taxpayer protested the assessment.

...

The Department's method to determine Taxpayer's income is as follows. First, the Department determined Taxpayer's business receipts for each of the tax years. Next, the Department used information from bizstats.com--a website which provides averages of expenses in various industries--to derive Taxpayer's business expenses.

In some cases, Taxpayer had information to substantiate certain categories of expenses, such as employee wages for 2008 and 2009. For Taxpayer's wages paid in 2008 and 2009, along with rent, advertising, and repairs, the Department used Taxpayer's provided information as opposed to the average provided for wages and certain other categories.

Prior to hearing, Taxpayer provided federal Schedule Cs for each year. The Schedule Cs list a loss for each year. However, Taxpayer did not provide any source documentation or any other information to demonstrate that the numbers listed on his Schedule Cs were correct or that the Department's audit was incorrect. The Department's estimate of Taxpayer's adjusted gross income was a valid and reasonable method in this case and thus Taxpayer's protest is denied.

http://www.in.gov/legislative/iac/20120530-IR-045120224NRA.xml.html