Wednesday, January 15, 2014

Revenue Waives Penalty Where Failure to Remit Quarterly Estimated Payment was Result of "Single Unscheduled Income Event"

Excerpts of Revenue's Determination follow:

Taxpayer is an Indiana resident. The Indiana Department of Revenue ("Department") determined that Taxpayer failed to file a quarterly estimated return during the tax year 2012. The Department therefore issued a proposed assessment for penalty. Taxpayer protested the imposition of the penalty.

The Department issued proposed assessment for penalty on failure to timely file a return and remit an estimated individual income tax payment for one quarter in tax year 2012. Taxpayer protests that he received an unscheduled securities income distribution. Due to the end of year distribution of the unscheduled income, Taxpayer filed neither an estimated tax schedule nor made prepayment to the Department. However, Taxpayer did appropriately account for the unscheduled income on his Indiana individual income tax return for tax year 2012. Taxpayer protests the imposition of penalty and requests a waiver of that penalty.
The Department refers to IC § 6-8.1-10-5, which states:
In the case of an underpayment of the estimated tax as provided in Section 6654 of the Internal Revenue Code, there shall be added to the tax a penalty in an amount prescribed by IC 6-8.1-10-2.1(b).
(Emphasis added).
In this case, Taxpayer was able to establish that his failure to remit a quarterly estimated income tax payment or file a return was the result of a single unscheduled income event. Though the Department initially considered this to constitute negligence and so imposed penalties under IC § 6-8.1-10-5; as a result of the protest process, Taxpayer has affirmatively established that he acted reasonably in his efforts to comply with Indiana's tax filing requirements. The penalty will be waived.