91-0833 - Withholding Tax

 

BEFORE THE UTAH STATE TAX COMMISSION

_____________________________________

XXXXX ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

Petitioner, : AND FINAL DECISION

v. : Appeal No. 91-0833

: Account No. XXXXX

AUDITING DIVISION OF THE :

UTAH STATE TAX COMMISSION, :

Respondent. :

_____________________________________

STATEMENT OF CASE

By agreement of the parties, this matter comes before the Utah State Tax Commission for decision based upon the information contained in the Commission's file.

Based upon the record before it, the Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is withholding tax.

2. The period in question is XXXXX through XXXXX.

3. On XXXXX, Respondent issued its amended assessment for additional tax totalling $$$$$. The additional tax was assessed pursuant to two schedules, identified as Schedule A and Schedule B. Schedule A imposed tax of $$$$$, the amount Petitioner had withheld from employee wages, but not remitted to the Tax Commission. Schedule B imposed tax of $$$$$ for tax Petitioner had failed to withhold from employee wages.

4. Respondent also assessed Petitioner with penalties for nonpayment of the foregoing withholding taxes. As to Schedule A, penalty of 100% was imposed on the grounds Petitioner had fraudulently withheld payment with intent to evade the tax. A 10% negligence penalty was imposed with respect to Schedule B. Petitioner was also penalized for failure to file annual tax reconciliation forms and copies of W-2 forms.

5. Petitioner did not file withholding tax returns for the years XXXXX through XXXXX.

6. Petitioner does not contest the tax assessed in this matter, but seeks waiver of penalty and interest.

CONCLUSIONS OF LAW

Each employer shall, on or before the last day of April, July, October, and January, pay to the commission the amount required to be deducted and withheld from wages paid to any employee during the preceding calendar quarter (Utah Code Ann. 59-10-406(1)(a).)

Each employer shall file a return, in a form the commission prescribes, with each payment of the amount deducted and withheld under this part . . . . (Utah Code Ann. 59-10-4006(2).)

Each employer shall file an annual return, in a form the commission prescribes. . . . (Utah Code Ann. 59-10-406(3).)

The penalty for underpayment of tax is as follows:

(a) If any underpayment of tax is due to negligence, the penalty is 10% of the underpayment.

(b) If any underpayment of tax is due to intentional disregard of law or rule, the penalty is 15% of the underpayment.

(c) For intent to evade the tax, the penalty is the greater of $500 per period or 50% of the tax due.

(d) If the underpayment is due to fraud with intent to evade the tax, the penalty is the greater of $500 per period or 100% of the underpayment. (Utah Code Ann. 59-1-401(3)(d).)

The penalty for failure to file an information return or a complete supporting schedule is $50 for each return or schedule up to a maximum of $1,000. (Utah Code Ann. 59-10-401(4).)

In the income tax arena, fraud is an actual intentional wrongdoing with the specific intent to evade tax believed to be owing. . . . (Jensen v. State Tax Commission, No. 910151, filed July 23, 1992.)

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

Because Petitioner concedes that the tax in this matter is properly assessed, the only issue before the Commission is Petitioner's request that penalty and interest be waived.

A 100% fraud penalty has been assessed in connection with the audit's Schedule A. Petitioner concedes it failed to file the returns relating to Schedule A or remit the taxes withheld from employee wages. While such evidence is sufficient to establish Petitioner's intent to evade such taxes, it is insufficient to establish the specific intent necessary to impose the more stringent fraud penalty. The Commission therefore concludes that Petitioner may be assessed a 50% penalty for intent to evade the tax due under Schedule A, but may not be assessed with the 100% fraud penalty.

A 10% negligence penalty has been imposed in connection with the tax assessed under Schedule B. Petitioner's pattern of violating withholding tax requirements justifies a 10% negligence penalty, at the least.

The final item of penalty is that imposed under Utah Code Ann. 59-1-401(3)(d) for failure to file information returns or supporting schedules. The statute imposes a $50 penalty for each missing return or schedule, up to a maximum of $1,000. Petitioner concedes it failed to file such returns and schedules.

As to Petitioner's request that penalty and interest be waived, Petitioner has shown no basis to support such a waiver.

Based upon the foregoing, the Tax Commission hereby reduces the penalty assessed with respect to Schedule A of Respondent's assessment from 100% to 50%. All other penalties and interest, as well as the tax itself, are affirmed. Respondent is instructed to recompute Petitioner's liability in accordance with this decision. It is so ordered.

DATED this 21 day of April, 1993.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner