Why Was My IT-40RNR Return Rejected and How Do I Fix It?

Filing taxes can be complicated, especially with state-specific forms like the IT-40RNR. If your return was rejected, understanding the reason and how to fix it is crucial to avoid processing delays or penalties.

Several factors can lead to an IT-40RNR rejection, including incorrect personal details, residency status errors, or misreported taxable income. Identifying and correcting these issues ensures your return is accepted without further problems.

Who Must File This Form

The IT-40RNR is for nonresidents of Indiana who earned income from the state. Unlike full-year or part-year residents who file different forms, this return applies only to those who meet strict nonresidency criteria while having Indiana-sourced income. This includes wages from an Indiana employer, business income from operations in the state, or rental income from Indiana properties.

To qualify, taxpayers must not have maintained a permanent residence in Indiana during the tax year. Even if someone worked in Indiana all year, they must have had a legal domicile in another state to be eligible. If filing jointly, neither spouse can be an Indiana resident, as one spouse’s residency status would disqualify them from using the IT-40RNR.

Only income directly connected to Indiana qualifies. If a taxpayer has income from other states, they may need to file in their home state and claim a credit for taxes paid to Indiana instead of using the IT-40RNR. Misclassifying income sources is a common mistake that leads to rejection.

Taxable Income and Residency Factors

Determining taxable income for an IT-40RNR return requires knowing what qualifies as Indiana-source income. Indiana taxes only income earned within the state, including wages from Indiana-based employment, business income from operations in Indiana, and rental earnings from Indiana properties. Interest, dividends, and capital gains are generally not considered Indiana-source unless tied to business activity conducted in the state.

Residency status affects taxation. Indiana defines residency based on domicile, meaning a taxpayer’s permanent legal home. A person can work in Indiana without being a resident, but maintaining ties such as voter registration, a driver’s license, or a mailing address in the state could complicate nonresident status. If the Indiana Department of Revenue determines a taxpayer has sufficient connections to the state, they may be required to file a different return, leading to additional tax liabilities.

Income allocation errors are another common reason for rejection. Many taxpayers mistakenly report all earnings as Indiana-source when only a portion applies. For example, if a remote worker performs duties for an Indiana employer but works entirely from another state, that income is generally not taxable by Indiana. Similarly, commissions or bonuses tied to work performed outside the state should not be included as Indiana-source income. Misallocating income can lead to overpayment or underpayment, both of which can trigger audits or corrections by the state.

Steps for Completing the Form

Filling out the IT-40RNR correctly starts with gathering necessary documentation, including W-2 forms for wages earned in Indiana, 1099s for other Indiana-sourced income, and records of state tax withholdings. If income was generated through a business or rental property, supporting documents such as profit-and-loss statements or lease agreements should be reviewed for accuracy.

Once all relevant documents are on hand, income details must be carefully transferred onto the form. The IT-40RNR requires taxpayers to report only Indiana-source income. Double-checking figures against pay stubs and tax forms ensures accuracy. State tax withheld must also be correctly reported to claim credit for taxes already paid. Errors in these areas can result in rejected filings or unnecessary tax assessments.

Deductions and credits affect the final tax liability. Indiana allows certain adjustments, such as deductions for military pay earned while stationed outside the state or credits for taxes paid to other jurisdictions. Reviewing the instructions provided by the Indiana Department of Revenue helps identify eligible deductions. Taxpayers should also ensure they are using the most recent version of the form, as tax laws and allowable deductions can change annually.

Common Rejection Codes

Errors in taxpayer identification frequently cause IT-40RNR rejections. If a Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) does not match IRS records, the return may be denied. This often happens when a name change due to marriage or divorce has not been updated with the Social Security Administration. A mismatch between the taxpayer’s name and what’s on file can trigger a rejection. Ensuring that the name and SSN or ITIN match official records before submission helps prevent this issue.

Issues with state tax withholding amounts can also lead to rejection. If the Indiana tax withheld reported on the IT-40RNR does not match what the state has on record from employer filings, the return may be flagged. This discrepancy can arise from incorrect data entry or employers failing to submit proper withholding reports (Form WH-3) to the Indiana Department of Revenue. Taxpayers should verify their W-2 and 1099 forms against their final pay stubs and cross-check employer-reported figures using Indiana’s INTIME online portal before submitting their return.

Correcting and Resubmitting

Once the reason for rejection has been identified, making corrections and resubmitting the IT-40RNR should be done promptly to avoid delays. The Indiana Department of Revenue provides specific rejection codes that indicate the exact issue, allowing taxpayers to address errors efficiently. Depending on the mistake, the correction process may involve updating personal details, adjusting reported income, or providing additional documentation to verify tax withholdings.

If the rejection was due to incorrect personal information, such as a mismatched Social Security number or name, taxpayers should verify their details against official records before resubmitting. This may require checking with the Social Security Administration or reviewing prior tax filings to ensure consistency. When errors involve income reporting, reviewing W-2s, 1099s, and employer-provided statements is necessary to confirm that only Indiana-source income is included. Any discrepancies should be corrected before resubmitting the return electronically or by mail.

For withholding mismatches, taxpayers should compare their reported Indiana tax withholdings to what their employer submitted to the state. If the employer made an error, requesting a corrected W-2 or 1099 is the best course of action. If the taxpayer made a mistake in entering the withholding amount, they can simply adjust the figures and resubmit. Using Indiana’s INTIME portal to verify withholding records can help ensure accuracy before filing again. Resubmitting electronically is generally faster, as it allows for quicker processing and confirmation of acceptance.