02-1677
Personal Penalty Assessment
Signed 3/28/03
BEFORE THE UTAH STATE TAX COMMISSION
: Order
and Decision from Initial Hearing
: Appeal No. 02-1677
v. :
: Acct. No. #####
Taxpayer Services Division of the Utah State :
Tax
Period 2000
_______________________________________________
Presiding:
Appearances:
For Petitioner: PETITIONER, Petitioner
For Respondent: Gale Francis, Assistant Attorney General, and
Donna Smith, Taxpayer Services Division.
The Division issued a personal penalty assessment against Petitioner for deficiencies of withholding amounts reported, but not paid over to the state on behalf of COMPANY or COMPANY 2.
Petitioner
accepted employment with COMPANY 2 in late February, 2000. Petitioner was the sole employee of this
company in its Utah office. The
company’s owners lived and worked outside of Utah and operated several
companies in Utah. None of the owners,
officers or support staff were paid from COMPANY 2’s payroll during
Petitioner’s term of employment.
Petitioner was the only employee on the payroll.
Petitioner
was responsible for, among other things, paying COMPANY 2’s bills, filing its
tax returns and paying over the tax on behalf of this company. Petitioner stated he filed timely
withholding returns to avoid late filing penalties, but often made payments in
amounts less than the amounts due because the company did not have funds
available. In some cases, in sufficient
funds checks were submitted with the returns, so the account was not credited
for those amounts.
Section 59-1-302 of the Utah Code provides
that any person required to collect, truthfully account for, and pay over any
withholding tax but fails to do so is liable for a penalty equal to the total
amount of the tax due. At issue here is
whether Petitioner, as COMPANY 2’s representative, can be held personally
liable for that penalty. In this case,
Petitioner was not an officer of the company, but he was charged with the
authority and responsibility to write the checks, pay the bills and file the
company’s tax returns. Petitioner did
in fact complete and file the returns and he knew the company’s tax filings
were insufficient to cover its declared liability. The facts and circumstances support Respondent’s contention that
Petitioner was a person who was required to report and pay over taxes on behalf
of the company within the meaning section 59-1-302.
The
penalty assessment issued against Petitioner is based on the withholding tax
amounts due as reported by Petitioner.
At the hearing, Petitioner claimed that he did not actually receive all
of the income reported because some of his paychecks either bounced or were
never paid. At this point, the company
is out of business and there is no possibility that the company will amend its
withholding returns to reflect withholding calculated on Petitioner’s actual
rather than reported compensation. The
situation is further complicated by the fact that Petitioner apparently claimed
a credit for the full reported amount withholding on his state and federal
individual income tax returns for the year in question. Whether there is some advantage to
Petitioner in amending his individual returns to reflect the actual amounts of
compensation and withholding is a question beyond the scope of this
appeal. At this time, the Division is
justified in relying on the returns filed and the amounts declared in those
returns.