95-1249

Income Tax

Signed 7/25/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, : ORDER

:

v. : Appeal No. 95-1249

:

AUDITING DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

:

Respondent. : Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a Status Conference and was therein converted to an Initial Hearing pursuant to a stipulation of the parties and pursuant to the provisions of Utah Code Ann. §59-1-502.5, on XXXXX. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner XXXXX and XXXXX, wife of the Petitioner. Present and representing Respondent was XXXXX from the Auditing Division.

In XXXXX, and for some prior periods, Petitioner was employed by a body and fender shop by the name of XXXXX. The owner of the body shop treated Petitioner as an independent contractor, even though he was employed as a full time employee.

Petitioner attempted to obtain the information from his employer regarding the amounts of income which he had received during the year so he could file an income tax return. He was not able to obtain the information from his employer. The wife of Petitioner then called the Internal Revenue Service, and was told that if they did not have the information they should make an estimate of the amount which had been received and be sure that it was at least 80% of the amount which had actually been received, and then file a tax return showing such amount as income. Petitioner followed that advice, and timely filed a federal and state income tax return for both XXXXX, based upon estimates.

Petitioner's wife had contacted numerous governmental agencies, including the Internal Revenue Service, the State Tax Commission, and the Department of Employment Security and other agencies to try to get them to force Petitioner's employer to withhold payroll taxes and to treat Petitioner in all respects as an employee. Petitioner alleges that she started an SS-8 proceeding before the Internal Revenue Service to have them determine that Petitioner was an employee of XXXXX, and that the proceeding was ultimately successful. She further represented that she personally called the Tax Commission in XXXXX and informed them of the SS-8 proceeding before the Internal Revenue Service, and requested the Commission to also pursue the employer, but nothing was done. XXXXX was ultimately determined to be an employer of Petitioner, and was required to provide him with the information. When that information was received, it was determined that Petitioner had significantly more income than he had reported on his return.

As a result of the additional income, which was determined after the SS-8 proceeding before the Internal Revenue Service, a penalty of $$$$$ was imposed against the Petitioner for XXXXX, and a penalty of $$$$$ was imposed against Petitioner for XXXXX. Respondent has represented that 1/2 of the XXXXX penalty was placed upon Petitioner by the Utah State Tax Commission computer while the case was under appeal before the Commission, and therefore, it is acknowledged that 1/2 of the XXXXX penalty should never have been placed upon Petitioner. In addition, interest was charged on the amounts due for both years.

Petitioners have requested that the Commission waive both the penalty and the interest.

APPLICABLE LAW

The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon showing of reasonable cause. (Utah Code Ann. §59-1-401(10).)

DECISION AND ORDER

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, but sufficient cause has not been shown to waive the interest assessed for the periods at issue.

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 25 day of July, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

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