Withholding Tax Penalty
BEFORE THE UTAH STATE TAX COMMISSION
c/o OWNER, ) ORDER
Petitioner, ) Appeal No. 02-1712
v. ) Account No. #####
AUDITING DIVISION, ) Tax Type: Withholding Tax Penalty
UTAH STATE TAX COMMISSION, )
) Judge: Chapman
Kerry R, Chapman, Administrative Law Judge
For Petitioner: OWNER, Owner
PETITIONER REP, Accountant
For Respondent: Brent Taylor, from the Auditing Division
STATEMENT OF THE CASE
This matter came before the Commission for an Initial Hearing on March 4, 2003. Petitioner is appealing the penalty assessed pursuant to an audit of its 1999 withholding tax. The amount of the penalty was $$$$$.
Petitioner agreed that there was a discrepancy between the amount of withholding tax remitted to the state by the Petitioner and the amount of tax reported on the Petitionerís Form TC-96R for the 1999 tax year. The amount of withholding tax remitted to the state during January through December 1999 was $$$$$. The amount of withholding reported on the Form TC-96R was $$$$$. The difference is $$$$$.
The Respondent assessed a 10% negligence penalty pursuant to Utah Code Annotated ß59-1-401(5)(a) because the Petitioner failed to reconcile the tax withheld with the amount reported withheld on the Form TC-96R.
Petitioner asks that the penalty be abated. PETITIONER REP, accountant for the Petitioner, stated he gave one of the Petitionerís employees an instruction to make an estimated payment of tax on the Petitionerís behalf. In mistake, the employee added the amount of the payment to the Petitionerís W-2 and Form TC-96R. Accordingly, the amount of withholding tax reported on the Form TC-96R was nearly double the actual amount withheld and remitted. Because this mistake was a non-intentional error resulting from misunderstood instructions, the Petitioner asks the Tax Commission to waive it.
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).
The Petitioner and his accountant offered information at the Initial Hearing indicating that the discrepancy between the taxes reported on the Form TC-96R and the taxes withheld and remitted was due to the misunderstanding of one of the Petitionerís employees concerning a payment of estimated taxes. The Commission considers this mistake and the Petitionerís lack of auditing procedures to catch such a mistake to exceed those errors that arise in the ordinary course of business. As a result, we determine that these actions rise to the level of negligence. Accordingly, we find that the Section 59-1-401(5)(a) negligence penalty can be justified.
However, we do not see these circumstances to be so careless or reckless as to show utter indifference to the resulting consequences. Nor were we supplied any evidence to convince us that the error rises to the level of gross negligence. In addition, we note that the Petitioner had never before made a mistake involving the reconciliation of the Form TC-96R with the actual taxes withheld and remitted. For these reasons and based on the evidence submitted at the Initial Hearing, we do not believe these circumstances rise to the level of gross negligence.
Although the Petitioner has often had errors concerning the late filing and paying of the withholding tax, the Petitioner has never had a reconciliation error of this type or been penalized for this type of error in the past. Accordingly, we consider this a first time error eligible for waiver.
DECISION AND ORDER
Based on the information available, there is cause for waiver of the negligence penalty in this matter because it qualifies as a first time error. Based upon the foregoing, the Commission waives the 10% negligence penalty of $$$$$ assessed for the tax year 1999. 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
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 17th day of March , 2003.
Kerry R. Chapman
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 17th day of March , 2003.
Pam Hendrickson R. Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc B. Johnson