BEFORE THE UTAH STATE TAX COMMISSION
In Re: ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
XXXXX ) AND FINAL DECISION
: Appeal No. 91-0915
: Account No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Alan Hennebold, 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 periods in question are XXXXX through XXXXX.
3. For many years prior to the periods in question, Petitioners relied upon XXXXX, a CPA with XXXXX, to handle their financial affairs. Eventually, XXXXX, assumed responsibility for such matters, including management of Petitioners' XXXXX, compilation of Petitioners' business records, and assistance and advice regarding their investments. XXXXX prepared all of Petitioners' tax returns and kept their tax records at his own office.
4. With respect to XXXXX and XXXXX, the Petitioners filed and paid their income tax returns in a timely manner. With respect to XXXXX, XXXXX assured the Petitioners that extensions for filing had been obtained. In fact, XXXXX failed to file either the return or the request for extension.
5. In XXXXX, XXXXX confiscated XXXXX documents and files, including those of the Petitioners. It was then that Petitioners learned that no tax returns had been filed on their behalf for XXXXX.
6. The Petitioners obtained the services of another CPA, who was allowed to retrieve the Petitioners' documents from the Internal Revenue Service during the early summer of XXXXX. With that documentation, returns were prepared for XXXXX and XXXXX. The returns for both years were filed on XXXXX and were accompanied with payment of the tax and interest due.
7. The Internal Revenue Service audited the Petitioners' federal income tax returns for XXXXX and XXXXX, resulting in increases to Petitioners' federal tax liability. Commission staff then adjusted the Petitioners' state income tax liability to reflect the increase. As soon as the Petitioners were advised of their increased state income tax liability, they paid the same.
8. As a result of the foregoing, the Commission staff assessed late filing and late payment penalties in the amount of $$$$$, together with associated interest.
9. The Internal Revenue Service has waived all penalties associated with the Petitioners' federal income tax liability on the grounds the late filings and erroneous returns were the result of XXXXX malfeasance. XXXXX has been convicted in federal court on related charges of filing false income tax returns.
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
In this case, the record indicates that the Petitioners entrusted their financial affairs to their CPA. In violation of that trust, the CPA failed to properly account for their income on their XXXXX and XXXXX returns and failed to file returns for XXXXX and XXXXX. The Petitioners have promptly taken steps to correct such matters as they have come to their attention.
Based upon the foregoing, the Tax Commission finds that sufficient cause has been shown which would justify a waiver of the penalty associated with the Petitioners' individual income tax liability for XXXXX through XXXXX. However, the Petitioners do not dispute that they had use of the funds in question during the time such funds should have been paid to the Commission. Under such circumstances, interest is a reasonable charge for the use of the tax funds and is not waived.
However, Commission staff will recompute the amount of interest now due to reflect the waiver of penalty authorized by this decision. It is so order.
DATED this 12th day of November, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco S. Blaine Willes