BEFORE THE UTAH STATE TAX
COMMISSION
_________________________
In Re: ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
XXXXX ) AND FINAL DECISION
: Appeal No.
91-0466
: 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
were XXXXX and XXXXX, CPA.
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 period in question is the tax year
XXXXX.
3. In filing their extension form for the year
in question, Petitioners made a prepayment of $$$$$. The actual tax liability for the year in question was $$$$$. Petitioner's prepayment, therefore,
constituted 38% of the actual tax amount.
Petitioners' tax liability for the previous year was $$$$$. Therefore, Petitioners' $$$$$ prepayment was
not adequate. Utah Code Ann. §59-10-516
and Utah Administrative RuleR865-9I-23 provide that, for an extension to be
valid, a prepayment must accompany the extension of at least 90% of the current
year's liability or 100% of the previous tax year's liability. Petitioners did
not meet this criteria.
4. Petitioners assumed that their taxable
income would be the same for the year in question as for the previous
year. Petitioners reasoned that since
their personal exemptions had increased in the amount of $$$$$ and their
federal tax deduction increased from one third to one half, as well as the
state tax rate dropping from 7.35% to 7.2%, the $$$$$ would be more than
adequate to validate the extension.
Petitioners did not anticipate the higher amount of their taxable income
for the year in question which resulted in the higher tax liability. Petitioners stated that the reason
Petitioners' taxable income was ultimately greater than that for the previous
year is because Petitioners had had some difficulty in the past in collecting
payments on two installment contracts of which Petitioners are the creditors,
but that these contracts were brought up to date in their payments to
Petitioners in XXXXX.
CONCLUSIONS OF LAW
The
Tax Commission is granted the authority to waive, reduce, or compromise penalties
and interest upon a showing of reasonable cause. (Utah Code Ann. §59-1-401(8).)
DECISION AND ORDER
Although
Petitioners did not technically meet the requirements for filing the prepayment
with the extension request and the entire problem could have been avoided if
Petitioners had simply paid $$$$$ more with their extension request, which
would have constituted 100% of the previous tax year's liability and would have
validated the extension, the Commission finds that the penalty should be waived. Petitioners' prepayment was very close to
the required prepayment, and Petitioners made a good faith effort to make the
correct prepayment. Interest, however,
should not be waived because the state was deprived of the use of the funds 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
waiver of the penalty associated with Petitioners' XXXXX individual income
taxes. Interest is not waived, but
shall be adjusted to account for the penalty waiver. It is so ordered.
DATED
this 25TH day of June, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
ABSENT
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner