Indiana S Corps Receiving Balance-Due Notices

Any S corporation doing business in Indiana and deriving gross income from sources within Indiana must file an annual return, Form IT-20S, with the Indiana Department of Revenue (DOR).

Over the last month or so, Indiana taxpayers have been receiving notices after filing their IT-20S disallowing the credit for nonresident withholdings even though the payment is not due until April 17, 2018. According to the DOR, this was an automatic notice being generated by their system which was not able to distinguish a withholding credit from any other type of credit. They acknowledged it was a problem and worked quickly to get it fixed.

On March 7, the DOR issued this statement announcing a resolution:

"We have enhanced our process to hold any IT-20S that has been filed before the corresponding IT-6WTH payment, until after the IT-6WTH payment due date of April 17th. This will stop the generation of the taxpayer notices that are indicating the disallowance of the IT-6WTH credit and corresponding PFC coupon. We will revalidate these returns after April 17th and address only those returns that are missing payments at that time."

Although things appear to be fixed going forward, there may still be some notices already in the mail. If you filed a return with nonresident withholdings and receive a notice from the DOR, do not be concerned.

Below is a statement the director of external communications for the IN Department of Revenue sent to Sherrill Rude, vice president - advocacy, of the Indiana CPA Society when the issue was first brought to their attention:

"Taxpayers filing an IT-20S have been receiving letters from the Indiana Department of Revenue (DOR) indicating the disallowance of IT-6WTH credits. This disallowance indicates that the department has not yet received payment for the withholding calculated on the composite schedule. We recognize that this payment is not due until April 17, 2018. Unfortunately, our current system does not distinguish this withholding credit from any other type of credit. Since the credit cannot be verified by our system, this notice is generated and sent automatically.

DOR recognizes that there is a flaw in the current process and is working to identify opportunities to remediate this issue before next tax season. We understand your frustration and concerns and are exploring ways to reduce calls to both tax practitioners and our Customer Service Center. Clients should know that no additional steps need to be taken after receiving the notice, with the exception of paying their IT-6WTH by the due date. Timely payments will be reflected to the taxpayer's account and no further notice should be generated.

Please note, this notice may reference numerous types of adjustments. This response is limited to issues with disallowance of the IT-6WTH. If the notice received by your client references a different adjustment unrelated to the IT-6WTH credit, please review your records and contact the department with questions or concerns."

Monica Brickel, CPA
Senior Tax Manager
mbrickel@klcpas.com | 574.289.4011