Indiana's Tax System

Starting a new business in any country involves additional knowledge regarding fees, services, documents and the whole structure of the tax system and tax requirements. The whole structure of Indiana’s tax system for Indiana Businesses also does include certain peculiarities we have to mention in order to be aware of all the constituents making contribution to understanding of the specific features.

The State of Indiana does possess certain tax requirements. While we deal with nonprofit corporations (for instance, individuals or businesses) we are to get acquainted with certain state taxes. The type of the tax will directly depend on the particular circumstances your organization possesses. As long as you have started a new business you will have to register with the Income Tax Division of the Indiana Department of Revenue (the so-called IDR). Afterwards you will get a Not-For-Profit Registration Number. For this purpose you will be likely to contact the IDR and request Income Tax Information Bulletin #17 for the requirements of registration. In addition to this, do not forget to request the "Application to File as a Not-For-Profit Organization," form IT-35A. The mentioned above procedure is supposed to be performed not later than 120 days after you have created your business or organization. Anyway, keep in mind that the state generally does not approve the application till after you have gotten 501 (c) (3) status from the federal government. As soon as you are approved, you will be assigned a Not-For-Profit Registration Number that you will be able to use on sales tax exemption certificates while performing "qualified purchases." Besides, if your society has the intention of hiring employees, you will also need to get acquainted with the regulations pertaining to sales taxes, wage withholding, and unrelated business income taxes. But still information concerning these topics should be obtained directly from the Internal Revenue Service and the Indiana Department of Revenue.

While dealing with Indiana’s tax system we are to mention the so-called Tax Freedom Day. This is a special day when Americans have finally earned enough money to pay off the total tax bill for the year. In 2009, Indiana taxpayers had to work until April in order to pay their total tax bill, five days before National Tax Freedom Day (April 13).

According to the statistics, Indiana's state/local tax burden percentage ranks 28th highest (below the national average of 9.7%), estimated at 9.4% of income, Hoosiers pay $3,502 per capita in state and local taxes.

Indiana ranks 12th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: individual income taxes; unemployment insurance taxes; sales taxes; corporate taxes; and taxes on property, including commercial and residential property.

Indiana's individual income tax system includes a flat 3.4% rate on federal adjusted gross income, which is a lot worse than some real tax top countries like luxembourg's tax system. That rate ranks 39th highest among states. Indiana's 2006 individual income tax collections were $795 per person. Indiana's corporate tax structure consists of a flat rate of 8.5% on all corporate income.