92-1734 - Income

BEFORE THE UTAH STATE TAX COMMISSION

_____________________________________

In Re: )

:

XXXXX, ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

) AND FINAL DECISION

:

) Appeal No. 92-1734

: Account No. XXXXX

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STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. XXXXX, Presiding Officer, heard the matter for and on behalf of the Commission. Petitioner XXXXX was present and represented himself.

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 personal income tax.

2. The period in question is the year XXXXX.

3. In XXXXX, XXXXX requested that her employer allow her to withdraw $$$$$ from her profit sharing plan for hardship reasons. Petitioners were in need of purchasing a home for their family.

4. This $$$$$ distribution was approved in the same year on hardship grounds.

5. Upon receiving the money, Petitioners sought tax advice from the administrator of the profit sharing plan, XXXXX. XXXXX told Petitioners that the lump sum distribution was not taxable so long as Petitioners used the entire amount to purchase a home.

6. Petitioners used the $$$$$ to buy a home.

7. In XXXXX, the Internal Revenue Service contacted Petitioners and disallowed the exemption Petitioners had taken on the lump sum distribution. Petitioners paid the I.R.S. in the same year.

8. In XXXXX, Petitioners were notified by the Tax Commission that they owed more taxes for XXXXX based on the I.R.S. audit change.

9. Petitioners paid the state soon thereafter.

10. Petitioners have since questioned XXXXX about the inaccurate tax information she gave them. She explained that she thought that Congress had passed a new law allowing for lump sum distributions to be nontaxable in hardship cases when the money is used for purchasing a home. She had learned since then that Congress was only contemplating such a law.

11. Petitioners were penalized ten percent for nonpayment of taxes. Another ten percent penalty was assessed for failing to notify the Tax Commission of the I.R.S. audit change within 90 days of the its final notice. Interest was also added.

12. Petitioners contend that they reasonably relied upon the tax advice given them by the administrator of their profit sharing plan. They are requesting a waiver of the penalties only.

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

Based upon the foregoing, the Tax Commission finds that sufficient cause has been shown which would justify a reduction of the penalties in question to a single ten percent penalty instead of two. Petitioners failed to contact the Tax Commission after the I.R.S. audit change within 90 days. Interest is not waived. It is so ordered.

DATED this 25th day of February, 1993.

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