Taxpayer is a C corporation operating in Indiana. For tax year 2008, Taxpayer initially reported an Indiana tax liability of roughly $74,000. The Indiana Department of Revenue ("Department") audited Taxpayer and determined that Taxpayer properly had an Indiana tax liability of approximately $725,000. The Department did not assess a negligence penalty on the assessment. However, the assessment resulted in a penalty for failure to remit sufficient estimated taxes for three quarters in 2008.
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Taxpayer protests the imposition of the ten percent penalty imposed because of Taxpayer's failure to make sufficient estimated tax payments as required pursuant to IC § 6-3-4-4.1(d). The burden of proving a proposed assessment incorrect–including a penalty assessment–rests with the taxpayer, as provided under IC § 6-8.1-5-1(c).
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The Department is unwilling to agree that an audit assessment can never result an estimated tax penalty under IC § 6-3-4-4.1. However, in this case, Taxpayer's proposed assessment for Indiana income tax–which Taxpayer did not protest–was due to a reasonable, albeit legally erroneous, filing position. Based on the reasonableness of its actions and its payment of estimated taxes based on its original, reasonable filing position, Taxpayer has provided sufficient legal and factual grounds to justify penalty waiver for 2008.
