Thursday, June 5, 2014

Revenue Finds Taxpayer Demonstrated it had "Reasonable Cause" in Failure to File Withholding Forms

Excerpts of Revenue's Determination follow:

Taxpayer is an Indiana corporation.

During an audit, the Indiana Department of Revenue ("Department") determined that Taxpayer had not timely filed its WH-3 forms for the tax years 2011 and 2012 and imposed a penalty for each year. Taxpayer protested the imposition of the penalties.

A taxpayer who fails to file a return "is subject to a penalty." IC § 6-8.1-10-2.1(a). The Department shall waive the penalty if the taxpayer demonstrates that the failure to file a required return "was due to reasonable cause and not due to willful neglect." IC § 6-8.1-10-2.1(d); see also 45 IAC 15-11-2. The taxpayer may demonstrate reasonable cause by showing affirmatively that it used "ordinary business care and prudence" in not filing a required return. Whether a taxpayer demonstrates reasonable cause for penalty purposes is a fact-sensitive question and determined on a case-by-case basis. 45 IAC 15-11-2(b) and (c).
Taxpayer has demonstrated it had reasonable cause in its failure to file the required WH-3s. Taxpayer's protest is sustained. However, Taxpayer is now aware of its withholding tax filing obligations and a penalty may be imposed if this scenario occurs again.