95-1414
Income Tax
Signed 1/30/96
____________________________________
XXXXX, )
:
Petitioners, : ORDER
:
v. : Appeal No. 95-1414
:
AUDITING
DIVISION OF THE : Account Nos. XXXXX
UTAH STATE TAX COMMISSION, : & XXXXX
:
Respondent. : Tax Type: Income Tax
_____________________________________
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. The matter had originally been scheduled for
a Status Conference but the Status Conference was converted to an Initial
Hearing upon the approval of the parties.
Jane Phan, Administrative Law Judge, heard the matter for and on behalf
of the Commission. Present and
representing Petitioner by telephone conference call was XXXXX. Present and representing Respondent were
XXXXX and XXXXX.
Additional
tax of $$$$$, penalties of $$$$$ and interest of approximately $$$$$ were
assessed against Petitioners relating to their income tax for the year XXXXX.
Additional tax of $$$$$, penalties of $$$$$ and interest of approximately $$$$$
were assessed against Petitioners relating to their income tax for the year
XXXXX. The assessment was based on an
audit by the Internal Revenue Service (IRS) and the resulting final
determination increasing Petitioners' federal taxable income. The IRS reported the increase of
Petitioners' federal taxable income to the Respondent. The Respondent made the appropriate changes
to Petitioners' state taxable income issuing the statutory notices of audit
change on XXXXX. Petitioners now appeal
only the penalty and interest.
At
the hearing Petitioner explained that there had been an unintended error on
their federal tax returns for the years in question which was discovered by the
IRS during an audit. Petitioners had
retained an accounting firm for assistance with the IRS audit. Petitioner stated that when the IRS
proceeding was complete his accountants did not tell him that he needed to file
amended state returns. Petitioner admitted
that he did not ask them if he needed to do anything with the state
returns. Petitioner states that he just
did not know he was required to file amended state returns that he did not
purposefully try to avoid paying additional taxes to the State of Utah. He says he has now paid the tax and interest
so is square with the state and asks that the penalties be waived.
Respondent
explained that the Utah Code requires the taxpayer to notify the Commission, by
filing an amended return, within 90 days of a final determination from the IRS
which affects the taxpayer's state tax liability. Respondent explained that the 10% negligence penalty was assessed
for each of the years in question because Petitioner failed to file the amended
returns within the 90 days. Respondent
stated that the interest was assessed at the statutory rate and recommended
that the interest assessment be upheld because the State of Utah was denied the
benefit of the use of the funds and the Petitioner retained the benefit of the
use of the funds from the time the income tax was originally due. Respondent pointed out that Petitioner's
account history indicated a pattern of penalties, as penalties had been
assessed in addition to the years in question for the years XXXXX, XXXXX, and
XXXXX.
APPLICABLE LAW
State
taxable income is defined as federally taxable income with some modifications,
subtractions and adjustments. (Utah
Code Ann. §59-10-112.)
For
the purposes of determining state taxable income, federal taxable income means
taxable income as defined in Section 63, of the Internal Revenue Code. (Utah Code Ann. §59-10-111.)
If
a change is made in a taxpayer's net income on his or her federal income tax
return, either because the taxpayer has filed an amended return or because of
an action by the federal government, the taxpayer must notify the Utah Tax
Commission within 90 days after the final determination of such change. (Utah Code Ann. §59-10-536 (5)(a).)
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
When
the IRS made a final determination to increase Petitioners' federal taxable
income, this resulted in a change in Petitioners' state taxable income. The legislature, by statute, has placed the
burden upon the taxpayer to notify the State Tax Commission of this
change. Petitioners failed to do so and
the penalties were assessed along with interest from the time the tax was
originally due in XXXXX and XXXXX.
Ignorance of the law is not sufficient reasonable cause for waiver of
penalties or interest and the circumstances presented do not rise to the level
of reasonable reliance on a tax preparer.
In addition Petitioners' account indicates a pattern of errors.
Based
upon the information presented at the hearing, and the records of the Tax
Commission, the Commission finds sufficient cause has not been shown to waive
the penalties of $$$$$ and interest of $$$$$ for XXXXX or the penalties of $$$$$
along with interest of $$$$$ relating to Petitioners' income tax for
XXXXX. Petitioner did not appeal the
underlying amount of additional income tax assessed for XXXXX or XXXXX.
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 30th day of January, 1996.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
^^