Tuesday, February 19, 2013

Revenue Finds Taxpayer Made Showing of Reasonable Cause for Underpayment of Estimated Taxes

Excerpts of Revenue's Determination follow:


Taxpayer is an out-of-state corporation doing business in Indiana.
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The Department imposed a ten percent penalty and interest on Taxpayer because the Department found that Taxpayer – having filed a 2009 amended corporate income tax return adjusting its apportionment factor thus owing more tax – failed to remit ninety percent of the full amount of corporate income tax on or before the original due date for payment.
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The applicable statute is IC § 6-8.1-6-1, which provides in relevant part that:

(a) If a person responsible for filing a tax return is unable to file the return by the appropriate due date, he may petition the department, before that due date, for a filing extension. The person must include with the petition a payment of at least ninety percent (90[percent]) of the tax that is reasonably expected to be due on the due date. When the department receives the petition and the payment, the department shall grant the person a sixty (60) day extension.

(b) If a person responsible for filing a tax return has received an extension of the due date and is still unable to file the return by the extended due date, he may petition the department for another extension. The person must include in the petition a statement of the reasons for his inability to file the return by the due date. If the department finds that the person's petition is proper and that the person has good cause for requesting the extension, the department may extend the person's due date for any period that the department deems reasonable under the circumstances. The department may allow additional, successive extensions if the person properly petitions for the extension before the end of his current extension period.

(c) If the Internal Revenue Service allows a person an extension on his federal income tax return, the corresponding due dates for the person's Indiana income tax returns are automatically extended for the same period as the federal extension, plus thirty (30) days. However, the person must pay at least ninety percent (90[percent]) of the Indiana income tax that is reasonably expected to be due on the original due date by that due date, or he may be subject to the penalties imposed for failure to pay the tax.

(Emphasis added).

Taxpayer has made an affirmative showing of reasonable cause for underpaying its estimated 2009 taxes. IC § 6-8.1-10-2.1, IC § 6-8.1-6-1 and 45 IAC 15-11-2. The assessment of the ten percent penalty is waived. However, pursuant to IC § 6-8.1-10-1(e), the Department cannot waive interest.