Withholding Tax

Signed 8/13/02





: Initial Hearing Decision and Order

Petitioner, :

: Appeal No. 02-0558

v. :

: Acct. No. #####

Taxpayer Services Division of the Utah State :

Tax Commission, : Tax Type Withholding


Respondent. : Tax Period 2001





Irene Rees, Administrative Law Judge



For Petitioner: PETITIONER, Petitioner, and PETITIONER REP, CPA

For Respondent: Vickie Hymas and Laurie Payne, Taxpayer Services Division






Petitioner brings his request for waiver of penalties associated with an assessment against him. This matter was argued in an Initial Hearing held July 18, 2002.


Petitioner’s withholding account was in arrears beginning with June 2000 for the months of June, September 2000, November 2000, December 2000 and February 2001. There was a short period in which withholding tax was apparently remitted correct, then the problems surfaced again for each month from May 2001 through September 2001.


Petitioner states that he relied on his office manager to keep the books and to remit the withholding tax. Petitioner stated that he was aware of “cash flow” problems as long ago as mid-year 2000, but he was not specifically aware that the withholding tax had not been remitted until December 2001. At that time he learned that his office manager had been embezzling funds. She was terminated in December 2001 and the CITY Police Department is investigating the criminal aspects of this case. Petitioner has now hired an outside payroll company to make sure that there are no future problems with this account.


Petitioner asked for a waiver of the penalties on his account for the months from May 2001 through September 2001. Petitioner’s representative mentioned that the IRS abated penalties for two quarters and Petitioner hopes to get equivalent treatment from the Tax Commission.


According to Respondent, had Petitioner asked for a waiver of the penalties attached to the first three periods in 2000, the Division would have granted the waiver under their policy for first time error. However, because Petitioner’s waiver request pertained to periods in 2001, Petitioner’s request does not fit within the first time error criteria.


There are unusual circumstances in this case that justify a deviation from the normal first time error policy. It appears that Petitioner’s office manager came to the Tax Commission offices and made a payment against the outstanding balances for June 2000, November 2000 and December 2000 before Petitioner realized the full extent of the problem with his account. By making that payment, the office manager effectively foreclosed his opportunity for a waiver of the penalties associated with the first three periods. For that reason, and because Petitioner has shown diligence in attempting to resolve these matters, we are inclined to waive the penalties associated with the first three periods for year 2001.




The penalties associated with the May 2001, June 2001 and July 2001 periods are waived. The penalties associated with the other periods are sustained.




DATED this 13th day of August , 2002.



Administrative Law Judge




The undersigned Commissioners have reviewed this matter and concur in this decision.



Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner






Palmer DePaulis Marc B. Johnson

Commissioner Commissioner