01-0459

Income Tax

Signed 1/15/02

BEFORE THE UTAH STATE TAX COMMISSION

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PETITIONERS, ) ORDER

)

Petitioners, ) Appeal No. 01-0459

)

v. ) Account No. #####

)

AUDITING DIVISION OF ) Tax Type: Income Tax

THE UTAH STATE TAX )

COMMISSION, ) Tax Year: 1997

)

Respondent. ) Judge: Davis

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Presiding:

G. Blaine Davis, Administrative Law Judge

Appearances:

For Petitioner: PETITIONER REP, CPA

For Respondent: Mr. Dan Engh, from the Auditing Division

Mr. Steve Nelson, from the Auditing Division

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. '59-1-502.5 on November 20, 2001.

Petitioners are approximately 41% shareholders in a corporation which file tax returns as an "S" Corporation. The tax returns for that corporation were prepared by a Certified Public Accountant. Petitioners received their Schedule K-1 from that corporation and filed their 1997 income tax returns based upon the Schedule K-1 which they received.

Upon audit of the return of Petitioners, Respondent made certain adjustments. No penalty was imposed, but interest was added at the statutory rate.

Following the audit assessment, there was substantial correspondence and contact between Petitioners' representative and the Auditing Division. The ultimate result was a determination that the CPA who prepared the corporate return, including the Schedule K-1 for Petitioners, had made certain errors resulting in the corrections made by Respondent. Petitioners have acknowledged the additional tax is due, but they are requesting a waiver of the interest. The basis for the waiver request is because the error was the fault of the other CPA, and not the fault of Petitioners, and also because it took approximately four months for the communications to go back and forth between Petitioners' representative and the Auditing Division.

APPLICABLE LAW

The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. Utah Code Ann. §59-1-401(10).

DISCUSSION

If the interest was caused by an error from the Certified Public Accountant preparing the return, the Commission has determined that errors made by CPA's do not constitute reasonable cause for the Commission waiving interest. Petitioners may resolve that issue between themselves and the Certified Public Accountant.

In addition, it is not cause for waiving interest because the matter took four months to resolve the amount of tax.

DECISION AND ORDER

Based upon the foregoing, the Commission finds that sufficient cause has not been shown to justify a waiver of the interest associated with the 1997 income tax return of Petitioners. It is so ordered.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further appeal rights in this matter.

DATED this 15^th day of January, 2002.

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G. Blaine Davis

Administrative Law Judge

BY ORDER OF THE UTAH STATE TAX COMMISSION.

The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 15^th day of January, 2002.

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner