Taxpayer is an Indiana S Corporation. The Indiana Department of Revenue ("Department") determined that Taxpayer failed to file an IT-20S composite form for the 2010 and 2011 tax years and was assessed two $500 penalties for the Taxpayer's failure to list its nonresident shareholder on the composite schedule pursuant to IC 6-8.1-10-2.1 (j).
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Taxpayer protests the imposition of two $500 penalties for failure to file composite return schedules.
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The department shall waive the negligence penalty imposed under IC 6-8.1-10-1 if the taxpayer affirmatively establishes that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence. In order to establish reasonable cause, the taxpayer must demonstrate that it exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed under this section.
Departmental regulation 45 IAC 15-11-2 (b) defines negligence as "the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer." Negligence is to "be determined on a case-by-case basis according to the facts and circumstances of each taxpayer." Id.
Taxpayer maintains that the shareholders are Illinois residents and every year they have paid nonresident withholding and it was paid timely every month; however, this does not address why the IT-20S composite forms were not filed. IC 6-3-4-13 (i) provides that:
If a corporation fails to withhold and pay any amount of tax required to be withheld under this section and thereafter the tax is paid by the shareholders, such amount of tax as paid by the shareholders shall not be collected from the corporation but it shall not be relieved from liability for interest or penalty otherwise due in respect to such failure to withhold under IC 6-8.1-10 .
Taxpayer has not provided sufficient information to establish that its failure to file the composite Form IT-20S in this instance was not due to Taxpayer's negligence, but was due to reasonable cause as required by 45 IAC 15-11-2 (c). Consequently, they have not met their burden for waiver of the late payment penalty.
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