91-0466 - Income

 

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