95-1121

Income

Signed 11/3/95

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioners, : ORDER

v. : Appeal No. 95-1121

AUDITING DIVISION OF THE : Account No. XXXXX

STATE TAX COMMISSION, : XXXXX

STATE OF UTAH, :

Respondent. : Tax Type: Income

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5, on XXXXX. Alice Shearer, Commissioner, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX. Present and representing Respondent were XXXXX and XXXXX, both of the Auditing Division.

The Petitioners filed joint returns for the years in question XXXXX. XXXXX is disabled and has no income from employment. He does have disability income which is reported to him on a W-2 Form that has been attached to the Petitioners’ return for many years. For the XXXXX tax year the tax preparer who had been used by the XXXXX for a number of years suggested a change in the way this income was reported and took for the XXXXX a retirement exemption. The tax preparer told XXXXX that she did so after talking with the Tax Commission and ascertaining that XXXXX qualified as a retiree under the Utah Statute.

To explain this change, the tax preparer had XXXXX write a single paragraph letter that was attached to the tax form each year explaining why this retirement exemption was taken. XXXXX received refunds in XXXXX and XXXXX based on these returns. In XXXXX, after she filed her XXXXX returns, XXXXX received a letter from the Tax Commission informing her that the retirement exemption had been disallowed and her refund was recalculated to $$$$$. XXXXX called the Tax Commission and talked to an employee who indicated to her that a disability exemption would be advantageous for her to investigate, and told her the numbers of the forms that could be taken to her husband's doctor to effectuate the exemption. He also suggested that Petitioner amend returns for the two previous years taking the disability exemption, and this would give her further tax relief.

The Petitioner then obtained the proper forms and, as her regular tax preparer was unavailable, went to another tax preparer and had him fill out the amended returns, taking both the retirement and disability exemption for all three years. They were filed as amended returns.

The Tax Commission processed the XXXXX and XXXXX amended returns and issued refunds checks to the Petitioner. The Tax Commission did not process the XXXXX amended return. Instead, upon reviewing it, The Tax Commission initiated an audit of all three years, disallowed the retirement exemptions that had been taken, and issued a bill to Petitioner for the added tax for those years in the amount of approximately $$$$$. Interest of approximately $$$$$ has accrued upon the tax; no penalties were assessed.

Respondent explained that the reason the refund checks had been issued on the amended returns was that is how the system works. A review of all of the amended returns filed together was not initiated until the third one was in process and it was found to be inaccurately filled out, and the audit then ensued.

Petitioner asserted that she relied upon the Tax Commission and upon the tax preparers she hired, to review and fill out the actual forms. Filing them all together as amended returns, she had expected and thought it reasonable to expect, that the Tax Commission would review all three amended returns together and, if there were errors, would zero out the differences. In fact, this did not happen. She was first issued refund checks and then billed for a greater amount than the amount of the refunds that she had been issued.

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

Because the Petitioner relied upon advice received from a Tax Commission employee and sought out and relied upon the advice of competent tax preparers, and has filed tax returns on time for many years, exercising care and prudence in the management of the affairs of her and her disabled husband, no interest should be charged upon this account. If the Petitioner wishes to enter into a payment agreement, no interest should be charged upon the payment agreement at any time either.

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 interest assessed on this account.

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 3 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