95-1080

Income
Signed 11/16/95

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioners, : ORDER

v. : Appeal No. 95-1080

AUDITING DIVISION OF THE : Account Nos. XXXXX

UTAH STATE TAX COMMISSION, : and XXXXX

Respondent. : Tax Type: Income

_____________________________________

STATEMENT OF CASE

This matter was scheduled for a Status Conference before the Utah State Tax Commission on XXXXX. At the Status Conference the parties requested that the conference be converted to the Initial Hearing in this matter pursuant to the provisions of Utah Code Ann. §59-1-502.5. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioners were XXXXX. Present and representing Respondent were XXXXX and XXXXX.

Petitioners are appealing penalties in the amount of $$$$$ and interest of approximately $$$$$ which were assessed against them relating to their income tax for the $$$$$ tax year. At the hearing Petitioners explained that an insurance salesman who represented himself as a "Tax Planning Consultant" had convinced them to cash in their insurance policies, the proceeds from which went to acquiring new policies. Petitioners, who have no expertise in insurance or tax matters, relied on the advice of this insurance salesman. When Petitioners actually understood what had been done they felt that the salesman had seriously taken advantage of them and caused them serious financial hardship.

One of the items cashed in for Petitioners was an annuity. Petitioners had a certified public accountant (CPA) prepare their taxes for XXXXX and they did inform the CPA that they had cashed in some insurance policies. The CPA did not include the income from the annuity on Petitioners' taxes. Petitioners did not know that there was a tax difference between an annuity and an insurance policy. Following an IRS audit and subsequent amendment to Petitioner's federal income, Petitioner's did not file an amended return with the State of Utah with in the 90 days as is required by statute. When the Auditing Division made the additional tax, negligence penalty and interest assessment against Petitioners, Petitioners did pay all amounts in full.

After hearing the facts as described the Respondent recommended that the penalty be waived.

APPLICABLE 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(10).)

DECISION AND ORDER

Although sufficient reasonable cause has been shown for waiver of the penalty in this matter, there is not sufficient cause for waiver of the interest. More stringent reasonable cause standards are applied for waiver of interest because the State of Utah was denied the benefit of the tax funds, from the time they should have been paid on XXXXX until they were actually paid by Petitioners. Generally interest is waived only in the event an error made by the Tax Commission caused the late payment or late filing.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds sufficient cause has been shown to waive the penalties of $$$$$ relating to Petitioners' income tax for XXXXX. Sufficient cause has not been shown for waiver of the interest.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 16 day of November, 1995.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner