Taxpayers are individuals. Taxpayers filed an Indiana individual income tax return for a part-year or full-year nonresident claiming a refund for the tax year 2009. The Indiana Department of Revenue ("Department") processed the tax return and granted a refund of $269.00. A W-2 search revealed Taxpayers received Indiana wage income in 2009. On May 13, 2011, the Department issued a proposed assessment for the tax year 2009 in the total amount of $2,401.99.
After being contacted by Taxpayers, the Department granted Taxpayers an extension of four months on July 12, 2011. This extension was granted to provide Taxpayers additional time to provide information or pay the liability. On November 9, 2011, the extension expired, and the Department mailed a Demand Notice for Payment to Taxpayers. Taxpayers contacted the Department again, and on November 16, 2011, the Department granted Taxpayers a second extension of two months to provide additional information or pay the liability. This second extension expired January 17, 2012. Taxpayers had not provided any additional information or paid the liability, and the Department filed a tax warrant, engaging the services of a collection agency. On February 6, 2012, the Department granted Taxpayers a third extension, recalled the warrant, and removed the collection fees from the liability. This final extension of four months expired on June 5, 2012, and the Department once again filed a tax warrant and engaged the services of a collection agency. Taxpayers indicate that they paid the liability in full on November 13, 2012 in order to purchase a house. The payment totaled $2,767.61.
On June 21, 2013, Taxpayers provided a copy of a corrected W-2 (W-2C) showing that Taxpayers did not receive Indiana wage income for the tax year 2009. The Department promptly refunded $2,249.58 base tax plus $43.60 interest (for a total of $2,293.18). The Department did not refund $518.03, of which $269.00 is base tax, $39.63 is interest, and $209.40 is collection fees.
Taxpayers protest the assessment of base tax and interest. All tax assessments are prima facie evidence that the Department's claim for the tax is valid, and the taxpayer bears the burden of proving that any assessment is incorrect. IC § 6-8.1-5-1(c); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). The issue is whether Taxpayers have met their burden to show the Department's proposed assessment is incorrect.
The Department conducted a W-2 search which revealed that Taxpayers received Indiana wage income in the tax year 2009 and properly issued a proposed assessment based on that information. IC § 6-8.1-5-1. Taxpayers provided a copy of a corrected W-2 (W-2C) showing that Taxpayers did not receive Indiana wage income for the tax year 2009. Taxpayers have met their burden to prove this assessment is incorrect. Taxpayers' protest on the assessment of base tax and interest is sustained.
Taxpayers protest the imposition of collection fees. The issue is whether the Department's imposition of collection fees is proper.
In this case, the proposed assessment advanced through the legally required procedures. The Department issued a valid proposed assessment based on a W-2 search that revealed Taxpayers received Indiana wage income in the tax year 2009. The Department sent two notices, granted three extensions, and filed a tax warrant for the liability twice, having recalled one. The Department granted Taxpayers sufficient time during the process to provide information showing that the assessment was incorrect. Only after a second warrant was filed did Taxpayers establish that the proposed assessment was incorrect.
The Department incurred the fees based on a valid Department assessment that advanced to a tax warrant even though Taxpayer later established that the assessment was incorrect. The fees collected are proper if the fees were paid based on the information available to the Department at the time the fees were collected rather than at some time after collection. Since that is the case here, Taxpayers' protest of the imposition of collection fees is denied.