BEFORE THE UTAH STATE TAX COMMISSION
In Re: )
: INFORMAL DECISION
: Appeal No. 93-1429
: Account No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for hearing on XXXXX, Alan Hennebold, Administrative Law Judge, presiding. XXXXX, Certified Public Accountant, participated by telephone on behalf of Mr. XXXXX.
This decision is based upon information provided by Mr. XXXXX and taken from the Commission's file.
On XXXXX, Mr. XXXXX settled a dispute with the Internal Revenue Service which had the effect of increasing both his income and his federal income tax liability for XXXXX. As part of the settlement, the IRS provided Mr. XXXXX with the following information:
The Internal Revenue Service has agreements with State tax agencies under which information about Federal income tax, including increases or decreases, is exchanged with the States. If this change affects the amount of your State income tax, you should file the State form.
Based on the foregoing, Mr. XXXXX and his C.P.A. understood that the IRS would inform the Utah State Tax Commission of the increase to Mr. XXXXX's adjusted gross income and that the Commission would then notify Mr. XXXXX of his additional Utah income tax liability. Consequently, Mr. XXXXX waited to hear from the Commission.
When the Commission learned of the increase in Mr. XXXXX's income, it assessed him with additional tax of $$$$$ plus interest. It also assessed a 10% penalty for failure to report the increased income. Mr. XXXXX immediately paid the additional tax and interest and requested that the Commission waive the penalty.
While Mr. XXXXX's request for penalty waiver was under consideration, a second penalty of $$$$$ was assessed against him for his failure to pay the first penalty.
Except for the incident in question, Mr. XXXXX has properly filed and paid his Utah income tax for other years.
DECISION AND ORDER
As a preliminary matter, Mr. XXXXX misunderstands why the first penalty was imposed. The penalty did not relate to the merits of his dispute with the IRS. Instead, it was imposed because he failed to report that his taxable income had increased as a result of his settlement with the IRS.
Although Mr. XXXXX should have amended his XXXXX return to show the additional income, the information he received from the IRS was somewhat ambiguous. Furthermore, Mr. XXXXX enjoys a good history of compliance with Utah's income tax requirements. The Commission therefore finds reasonable cause to waive the initial 10% penalty. The second penalty, in the amount of $$$$$, should never have been imposed.
In summary, the Commission waives all penalties imposed against Mr. XXXXX with respect to his XXXXX Utah income tax liability. It is so ordered.
DATED this 19th day of November, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Roger O. Tew
Joe B. Pacheco Alice Shearer
NOTICE: You have twenty (20) days after the date of the final order to file a request for reconsideration or thirty (30) days after the date of the final order to file in District Court a petition for judicial review. Utah State Tax Commission Administrative Rule R861-5A-1(p) and Utah Code Ann. '63-46b-14(3)(a).