Indiana DOR Audit Response — IDR Responses and Position Statement

INDIANA DEPARTMENT OF REVENUE — AUDIT RESPONSE PACKAGE

TABLE OF CONTENTS

1. Cover Letter to Auditor
2. Taxpayer and Audit Identification
3. Authorization and Power of Attorney
4. Statute of Limitations Tracker
5. Records Retention and Production Index
6. IDR Response Log
7. Position Statement
8. Penalty Defenses
9. Confidentiality and Privilege Reservations
10. Taxpayer Rights Acknowledgment
11. Closing and Signature
12. Indiana Audit Practice Notes
13. Sources and References

1. COVER LETTER TO AUDITOR

VIA SECURE EMAIL / CERTIFIED MAIL — RETURN RECEIPT REQUESTED

Date: [__/__/____]

[AUDITOR NAME]
Audit Division
Indiana Department of Revenue
[ADDRESS LISTED ON ENGAGEMENT LETTER]

Re: Audit Response — [TAXPAYER NAME] — TID [____] — Audit No. [____]

Dear [AUDITOR]:

This package contains Taxpayer's response to the Department's Information Document Requests dated [__/__/____] through [__/__/____] and Taxpayer's written position statement on the open audit issues.

Taxpayer remains fully cooperative and is committed to providing the Department with the records necessary to determine the correct Indiana tax liability. Where Taxpayer has asserted privilege or where requested records are not within Taxpayer's possession, custody, or control, that fact is identified herein with reasonable specificity.

2. TAXPAYER AND AUDIT IDENTIFICATION

3. AUTHORIZATION AND POWER OF ATTORNEY

3.1. Indiana DOR Form POA-1 is on file (or attached as Exhibit POA), authorizing the following representative(s) to act on Taxpayer's behalf during this audit:

3.2. All audit communications should be directed to the representative(s) listed above. Taxpayer requests that the auditor refrain from direct contact with Taxpayer personnel without prior coordination through counsel, consistent with the Indiana Taxpayer Bill of Rights.

4. STATUTE OF LIMITATIONS TRACKER

4.1. General Rule. Under IC 6-8.1-5-2(a), the Department generally has three (3) years from the later of (a) the due date of the return or (b) the date the return was filed to issue a proposed assessment.

4.2. Extended Periods.

4.3. Open Periods Tracker (this audit).

5. RECORDS RETENTION AND PRODUCTION INDEX

5.1. Statutory Authority. Pursuant to IC 6-8.1-5-4, Taxpayer is required to maintain books and records sufficient to determine its tax liability and to make those records available for inspection by the Department.

5.2. Records Maintained by Taxpayer.

5.3. Litigation Hold. Upon receipt of the audit engagement letter dated [__/__/____], Taxpayer issued an internal litigation/records hold instructing personnel to preserve all responsive records pending resolution of the audit.

6. IDR RESPONSE LOG

6.1. The following Information Document Requests have been received and are addressed in this package or in prior productions:

6.2. Objections / Limitations on Production.

• ☐ Records are outside the audit period and not relevant.
• ☐ Records are protected by attorney-client privilege or work-product doctrine.
• ☐ Records are not within Taxpayer's possession, custody, or control.
• ☐ Production would impose an undue burden disproportionate to the issue.
• ☐ Other: [DESCRIBE]

6.3. Privilege Log. A privilege log identifying any withheld documents is attached as Exhibit PRIV (or "Not Applicable").

7. POSITION STATEMENT

7.1 Issue Summary

7.2 Detailed Argument — Issue 1

7.2.1. Facts. [NUMBERED FACT STATEMENT WITH RECORD CITES.]

7.2.2. Authority. [STATUTE / REGULATION / TAX COURT CASE / LETTER OF FINDINGS.]

7.2.3. Application. [APPLY LAW TO FACTS.]

7.2.4. Conclusion. [REQUESTED RESOLUTION.]

7.3 Detailed Argument — Issue 2

7.3.1. Facts. [####]

7.3.2. Authority. [####]

7.3.3. Application. [####]

7.3.4. Conclusion. [####]

8. PENALTY DEFENSES

8.1. Negligence Penalty (IC 6-8.1-10-2.1). Taxpayer requests waiver under the reasonable-cause standard for the following reasons: [RELIANCE ON CPA, AMBIGUOUS GUIDANCE, FIRST-TIME ISSUE, GOOD-FAITH RETURN POSITION, ETC.].

8.2. Substantial-Understatement Penalty. [IF APPLICABLE — DESCRIBE SUBSTANTIAL AUTHORITY OR ADEQUATE-DISCLOSURE DEFENSE.]

8.3. Fraud Penalty (IC 6-8.1-10-4). Taxpayer denies any fraudulent intent. The Department bears the burden of proving fraud by clear and convincing evidence.

8.4. Interest. Interest under IC 6-8.1-10-1 is statutory and generally is not waivable absent ministerial error by the Department.

9. CONFIDENTIALITY AND PRIVILEGE RESERVATIONS

9.1. Confidentiality. All documents produced are confidential return information under IC 6-8.1-7-1 and may not be disclosed except as permitted by law. Taxpayer marks each production page accordingly.

9.2. Attorney-Client Privilege and Work Product. Production of any document is without waiver of attorney-client privilege, work-product protection, or any other applicable privilege. Inadvertent production shall be governed by Indiana Trial Rule 26(B)(5) clawback principles.

9.3. Federally Authorized Tax Practitioner Privilege. Indiana does not codify a federal tax-practitioner privilege coextensive with IRC § 7525, but Taxpayer reserves all available state-law privileges.

10. TAXPAYER RIGHTS ACKNOWLEDGMENT

Taxpayer affirms its understanding of the following rights under the Indiana Taxpayer Bill of Rights (IC 6-8.1-1.5) and DOR guidance:

• ☐ Right to courteous and professional treatment.
• ☐ Right to representation by an attorney, CPA, or enrolled agent at every stage.
• ☐ Right to confidentiality of return information (IC 6-8.1-7-1).
• ☐ Right to a written explanation of any proposed assessment.
• ☐ Right to protest a proposed assessment within 60 days (IC 6-8.1-5-1(b)).
• ☐ Right to a hearing and Letter of Findings before assessment becomes final.
• ☐ Right to seek rehearing within 30 days of the Letter of Findings.
• ☐ Right to original tax appeal in the Indiana Tax Court (de novo review).
• ☐ Right to assistance of the Indiana Taxpayer Rights Advocate (IC 6-8.1-11-3).

11. CLOSING AND SIGNATURE

Taxpayer respectfully requests that the Department close the audit consistent with the positions stated above, or, where the Department disagrees, that the Department issue a Notice of Proposed Assessment containing a clear, itemized basis for each adjustment so that Taxpayer may exercise its protest and appeal rights.

Date: [__/__/____]

Respectfully submitted,

[LAW FIRM / CPA FIRM NAME]

By: [________________________________]

[REPRESENTATIVE NAME], [INDIANA BAR / CPA / EA NO.]

Authorized Representative for Taxpayer

[ADDRESS]

Telephone: [NUMBER]

Email: [EMAIL]

cc: [TAXPAYER OFFICER], [TITLE]

12. INDIANA AUDIT PRACTICE NOTES

• Specialized Indiana Tax Court. Although audit-stage advocacy is administrative, every audit response should be drafted with the Indiana Tax Court (IC 33-26) in mind. The Tax Court has exclusive jurisdiction over original tax appeals from DOR final determinations and reviews them de novo. Building the audit record carefully preserves issues for Tax Court review and avoids late-stage waiver arguments.
• Statute of limitations. The default 3-year period (IC 6-8.1-5-2(a)) is the most powerful taxpayer protection. Track expiration dates per period and avoid voluntarily extending without adequate consideration. The maximum extension under IC 6-8.1-5-2(h) is 90 days beyond the otherwise-applicable period; multiple successive extensions may be entered into.
• Federal RAR. Indiana law requires taxpayers to report federal modifications within 180 days of the federal final determination (IC 6-3-4-6 / IC 6-8.1-5-2(g)). Failure to timely report opens an additional limitations window for the Department.
• Records preservation. IC 6-8.1-5-4 requires retention of books and records sufficient to determine liability. As a practical matter, retain all books, records, and source documents for at least the longer of (a) 3 years from the due date or filing date, (b) the period of any executed extension, or (c) the period an issue remains unresolved on protest, rehearing, or appeal.
• IDRs. Treat each IDR as a discrete formal request. Log it, track due dates, produce responsive non-privileged records on a Bates-numbered basis, and document objections in writing. Avoid informal oral responses to substantive questions; route everything through counsel.
• Penalty mitigation. Indiana's negligence penalty under IC 6-8.1-10-2.1 may be waived for reasonable cause. Document reliance on competent professionals, ambiguity of law, and good-faith compliance efforts contemporaneously with the audit response.
• Taxpayer Rights Advocate. If the audit becomes unreasonable or the auditor refuses to follow DOR procedures, the Indiana Taxpayer Rights Advocate Office (IC 6-8.1-11-3) provides an independent escalation channel.
• Confidentiality. All audit submissions are protected return information under IC 6-8.1-7-1. Mark and transmit accordingly; insist on secure file-transfer methods.

13. SOURCES AND REFERENCES

• Ind. Code § 6-8.1-1.5 (Taxpayer Bill of Rights) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 6-8.1-5-1 (Proposed assessment; protest; hearing) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 6-8.1-5-2 (Statute of limitations on assessment) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 6-8.1-5-4 (Books and records) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 6-8.1-7-1 (Confidentiality) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 6-8.1-10 (Penalties and interest) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 6-8.1-11-3 (Taxpayer Rights Advocate) — https://iga.in.gov/laws/2024/ic/titles/6
• Ind. Code § 33-26 (Indiana Tax Court) — https://iga.in.gov/laws/2024/ic/titles/33
• Indiana DOR Audit Manual — https://www.in.gov/dor/files/audit-manual.pdf
• Indiana DOR Taxpayer Bill of Rights — https://www.in.gov/dor/resources/tax-library/taxpayer-bill-of-rights/
• Indiana DOR Form POA-1 — https://www.in.gov/dor/tax-forms/
• Indiana Taxpayer Advocate — https://www.in.gov/dor/contact-us/taxpayer-advocate-office/

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An Indiana-licensed tax attorney or CPA must review and customize this document before submission. Statute-of-limitations computations, privilege determinations, and consent extensions are particularly fact-sensitive; verify all dates and authorities before use.