Personal Penalty Assessment

Signed 3/28/03





: Order and Decision from Initial Hearing

Petitioner, :

: Appeal No. 02-1677

v. :

: Acct. No. #####

Taxpayer Services Division of the Utah State :

Tax Commission, : Tax Type Personal Penalty

: Assessment

Respondent. :

Tax Period 2000




Irene Rees, Administrative Law Judge



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 companyís 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 2ís payroll during Petitionerís term of employment. Petitioner was the only employee on the payroll.

Petitioner was responsible for, among other things, paying COMPANY 2ís 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 2ís 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 companyís tax returns. Petitioner did in fact complete and file the returns and he knew the companyís tax filings were insufficient to cover its declared liability. The facts and circumstances support Respondentís 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 Petitionerís 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.



The personal penalty assessment is affirmed. Petitioner has 30 days from the date of this decision to request a formal hearing. In the alternative, Petitioner may pay the amount due or contact the Taxpayer Services Division to file an Offer in Compromise or arrange a repayment plan.



DATED this 28th day of March , 2003.



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