Indiana Automatic Taxpayer Refund

Under Indiana’s “Use of Excess Reserves” law, many Hoosier taxpayers have received a one-time $125 taxpayer refund.  In addition, Governor Eric Holcomb signed legislation on August 5, 2022 authorizing an additional $200 Automatic Taxpayer Refund per qualifying individual and $400 for those filing jointly.

Many of our clients serving as a fiduciary-Power of Attorney, Personal Representative, Guardian-are receiving refunds on behalf of their loved.  Consequently, we have prepared the following resource to answer some of the most common questions about what to do with a refund an individual has received on behalf of another.

Who is eligible for the refund?

An individual is eligible for the initial $125 Automatic Taxpayer Refund if the individual filed an Indiana resident tax return for the 2020 tax year with a postmark date of Jan. 3, 2022, or earlier. An Indiana resident tax return means the individual filed his or her state taxes using one of the following:

• Form IT-40: Indiana Full-Year Resident Individual Income Tax Return
• Form IT-40PNR: Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return, if you were married and filed jointly and you were an Indiana resident for the entire year (2020)
• Form SC-40: Unified Tax Credit for the Elderly and you resided in Indiana for more than six months in 2020

The law does not make allowances for those who did not file a qualifying tax return.

If an individual was eligible for the initial $125 Automatic Taxpayer Refund, that individual qualifies for the $200 additional Automatic Taxpayer Refund.

What if the recipient is deceased?

Individuals who died on or after January 1, 2020 and meet other eligibility requirements will receive their Automatic Taxpayer Refunds by direct deposit or check according to the information Indiana Department of Revenue has on file.

Refunds issued by direct deposit that are undeliverable will be reissued as a check from the Auditor of State’s Office.

If a check is issued to an individual who is deceased, the individual’s estate or surviving heir will be required to complete a Distributee’s Affidavit for Distribution of Estates (State Form 49377) and mail it with the check they received to Auditor of State’s office (AOS).

If you are Personal Representative or Distributee and are uncertain as to whom to distribute the funds, you should contact our office to schedule an appointment to review distribution of the property.

What if the recipient is receiving Medicaid benefits?

Unlike federal tax refunds which are disregarded for 12 months after receipt, no similar provision applies to state tax refunds.  Without further guidance from the Indiana Family and Social Services Administration, these refunds should be presumed to be a countable resource which means the recipient could exceed their Medicaid resource limit if value of the refund is added to his or her other resources.  Some examples of what a Medicaid recipient may be able to spend the money on without affecting eligibility are:

• Make a payment toward paying off debt.
• Make small repairs around the house.
• Update personal effects. Buy household goods or personal comfort objects. Buy a new wardrobe, electronics, or furniture.
• Buy needed medical equipment, see a dentist or get eyes checked if those items aren’t covered by insurance.

In addition, the Medicaid recipient may be able to gift the payment to certain family members.  Individuals should consider contacting legal counsel before initiating a spenddown plan.

For more information about the Indiana Automatic Taxpayer Refund, click here.