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.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner