95-1596
Income Tax
Signed 1/19/96
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioners, : ORDER
:
v. : Appeal No. 95-1596
:
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 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, penalties of $$$$$ and interest of approximately $$$$$ were assessed
against Petitioner relating to his 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
Petitioner's federal taxable income.
The IRS reported the increase of Petitioner's federal taxable income
to Respondent. Respondent made the appropriate changes to
Petitioner's state taxable income issuing the statutory notice of audit change
on XXXXX. Petitioner now appeals only
the penalty and interest.
At
the hearing Petitioner explained that at the time of the IRS assessment he was
not aware that he had to file an amended return with the State of Utah. Further, Petitioner was confused about when
the IRS's determination became final.
Petitioner thought the final determination from the IRS occurred in
XXXXX of XXXXX, after the State of Utah's statutory notice was issued. Petitioner may have been confused because of
the notices Petitioner received through the IRS collection process. Petitioner explained that his wife had
earned some interest income during XXXXX of which he was not aware when he
filed his income taxes for that year as they were in the process of
divorcing. The IRS increased
Petitioner's federal taxable income by the amount of this interest income. Petitioner stated that he did not
purposefully withhold information nor was he intentionally deceitful. Petitioner states that he is currently
unemployed and requiring payment would be a financial hardship.
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. If a taxpayer fails to notify the Commission within the 90 days
the 10% negligence penalty is applied.
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 Petitioner's federal taxable
income, this resulted in a change in Petitioner's state taxable income. The legislature, by statute, has placed the
burden upon the taxpayer to notify the State Tax Commission of this
change. Petitioner failed to do so and
the 10% penalty was assessed along with interest from the time the additional
tax was originally due in XXXXX of XXXXX,
Neither financial hardship nor ignorance of the law rise to the level of
reasonable cause sufficient for waiver of penalties or interest.
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 $$$$$ and interest of approximately $$$$$ relating to
Petitioner's income tax for 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 19th 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
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