2023 Indiana Code › Title 6. Taxation › Article 8.1. Department of State Revenue; Tax Administration › Chapter 10. Penalties and Interest › 6-8.1-10-5. Faulty Payment; Penalty; Required Use of Guaranteed Funds

Sec. 5. (a) As used in this section, "payment instrument" means:
(1) a check;
(2) a credit card;
(3) a debit card;
(4) an electronic funds transfer; or
(5) any other instrument in payment by any commercially allowable means.
(b) If a person makes a payment to the department for an amount due to the department with a payment instrument and the department is unable to obtain payment on the payment instrument for the full amount of the attempted payment when the payment instrument is presented for payment through the normal banking channels, the department shall:
(1) notify the person that the department was unable to obtain payment on the full amount of the payment instrument; and
(2) assess a penalty of thirty-five dollars ($35) not more than thirty (30) days after the department was unable to obtain payment.
(c) If the department determines that the person made a payment described in subsection (b) fraudulently or otherwise knowing that the department would be unable to obtain payment on the payment instrument for the full amount of the attempted payment when the payment instrument is presented for payment through normal banking channels, the penalty is equal to one hundred percent (100%) of the amount on which the department was unable to obtain payment, but not less than thirty-five dollars ($35). The following apply:
(1) A penalty assessment under this subsection shall be made not more than three (3) years after the department was unable to obtain payment.
(2) The penalty under this subsection shall not be made in addition to the penalty under subsection (b)(2). However, nothing shall prohibit the department from issuing a penalty under this subsection with regard to a payment after a penalty under subsection (b)(2) was issued.
(3) If a penalty under this subsection is reduced to the amount specified in subsection (b)(2), the department may issue a new assessment for the penalty within thirty (30) days after the final determination of the penalty reduction.
(d) If the department is unable to obtain payment on a payment instrument, the amount on which the department was unable to obtain payment shall not be considered to be a payment of that amount.
(e) The following apply:
(1) Any penalty under subsection (b)(2) is due not less than twenty (20) days after the department issues the assessment under subsection (b)(2).
(2) If the person fails to pay the penalty provided under this section in full within the time specified by the department, the department may file a tax warrant for the unpaid portion of the penalty in the manner provided under IC 6-8.1-8-2.
(3) For purposes of this article, a penalty under subsection (b)(2) shall not be considered to be a proposed assessment under IC 6-8.1-5-1.
(f) If a person receives a penalty under subsection (c), the penalty shall be treated as a proposed assessment as provided in IC 6-8.1-5-1. However, if the person pays the penalty under subsection (c) and files a claim for refund of the penalty, notwithstanding IC 6-8.1-9-1, the payment of the penalty shall not be refunded unless the person protested the penalty pursuant to IC 6-8.1-5-1 in a timely manner.
(g) The following apply:
(1) If the penalty under subsection (b)(2) relates to an attempted payment of a liability for which the department has filed a tax warrant under IC 6-8.1-8-2 or for which the department files a tax warrant under IC 6-8.1-8-2 prior to the expiration of the period specified in subsection (e), the tax warrant may include the amount of the penalty provided in this section prior to the expiration of the period specified in subsection (e).
(2) If a penalty under this section is included as part of a proposed assessment under IC 6-8.1-5-1, the filing of a tax warrant for the penalty under this section shall be timely if the tax warrant for the penalty:
(A) was filed on or before the day as a timely filed tax warrant for the proposed assessment;
(B) was filed as part of the tax warrant for the proposed assessment; or
(C) was otherwise filed within the period allowable under IC 6-8.1-8-2.
(h) The following apply:
(1) The department may waive the penalty under this section if the person establishes that the person acted with reasonable cause in the attempted payment.
(2) If the department determines that the penalty under subsection (b)(2) shall not be waived, including a reduction of a penalty under subsection (c) to the amount specified in subsection (b)(2), the determination is not subject to administrative or judicial review.
(3) If the department determines that the penalty under this section should be waived, but the liability for the penalty has advanced to a tax warrant:
(A) the amount due under the tax warrant shall be reduced by the amount of any penalty under this section included in the tax warrant but not paid; or
(B) if the person has paid the penalty under this section, the department shall refund the penalty under this section paid by the person.
(4) Nothing shall prohibit judicial review of a penalty under this section if the penalty was imposed on a payment instrument upon which the department was able to collect the full amount of the payment instrument upon presentation of the payment through the normal banking channels.
(i) If a person has been subject to a penalty under this section more than one (1) time during a twenty-four (24) month period, or has been subject to a penalty under subsection (c) that has not been reduced or waived, the department may require the person to remit all future payments for all listed taxes with guaranteed funds.
As added by Acts 1980, P.L.61, SEC.1. Amended by P.L.26-1985, SEC.17; P.L.18-1994, SEC.44; P.L.131-2008, SEC.33; P.L.182-2009(ss), SEC.259; P.L.293-2013(ts), SEC.35; P.L.146-2020, SEC.46.