BEFORE THE UTAH STATE TAX COMMISSION
In Re: ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
XXXXX ) AND FINAL DECISION
: Appeal No. 90-1619
: Account No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Joseph G. Linford, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioners was XXXXX, Attorney at Law.
Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is individual income tax.
2. The periods in question are the tax years XXXXX and XXXXX.
3. When the tax return for the XXXXX tax year became due, Petitioners and their accountant had some indication that there were going to be difficulties with this tax return because Petitioners were involved in a tax shelter which was being audited. The accountant accordingly filed an extension for XXXXX in order to give Petitioners and the accountant time to evaluate the results of the audit and its impact on Petitioners' XXXXX taxes.
4. During the months following, Petitioners' accountant moved several times, each time leaving no forwarding address. Petitioners, however, were able to locate the accountant and ask him regarding the status of their tax return. The accountant told Petitioners that he was taking care of everything in a timely manner. Petitioners then began to submit records to this accountant so that he could prepare their XXXXX tax return.
5. The accountant again moved at least once more and was subsequently incarcerated. Petitioners are not sure of the exact reason why the accountant was incarcerated. Petitioners began to try to locate the records that were in this accountant's possession, but were unable to locate most of these records. This began to occur about the time when the XXXXX tax return was due, but Petitioners had been informed by the accountant that an extension had been filed and they accordingly believed they had some time to be able to locate their records and file their return for XXXXX.
6. Petitioners then hired a new accountant who helped them to recreate most of the records which were never located. Once this was done the tax returns for the periods in question were filed in early XXXXX.
7. From the information Petitioners were able to piece together, it appeared to Petitioners that their former accountant had not filed the extension for XXXXX and had not done anything else on their tax returns for either of the two years in question.
CONCLUSIONS OF 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(8).)
DECISION AND ORDER
It is clear in this case that Petitioners relied on their former accountant to their detriment. Since this accountant had possession of Petitioners' records and represented to Petitioners that he was performing his duties regarding their taxes in a timely and proper manner, when in fact he was not, the circumstances which led to the late filing and payment of Petitioners' taxes for the periods in question were circumstances beyond Petitioners' control. This indicates that, pursuant to long established Tax Commission policy, the penalty amount should be reduced to $$$$$. Interest, however, should not be waived since the state was deprived of the use of the tax funds in question for a period of time, through no fault of its own, and should be compensated for that loss of use.
Based upon the foregoing, the Tax Commission finds that sufficient cause has been shown which would justify a reduction of the penalty associated with the tax years XXXXX and XXXXX, to the amount of $$$$$. Interest is not waived, but shall be adjusted to account for the reduction in the penalty. It is so ordered.
DATED this 14 day of February, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis