95-1649

INCOME TAX

SIGNED 7/29/97

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, )

Petitioner, : FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

v. : AND FINAL DECISION

)

COMPLIANCE AUDITING UNIT, : Appeal No. 95-1649

COLLECTION DIVISION OF THE )

UTAH STATE TAX COMMISSION, : Account No. #####

Respondent. )

: Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a Formal Hearing which began on March 19, 1997, and was reconvened on June 4, 1997. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing the Petitioner on March 19, 1997, was PETITIONER REP. Although duly notified of the continuance of the Formal Hearing on June 4, 1997, Petitioner did not appear. Present and representing the Respondent on both March 19, 1997, and June 4, 1997, were Michelle Bush, Assistant Attorney General, and Kenneth Cook from the Collection Division.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is Utah individual income tax.

2. The periods in question are the tax years 1988 through 1993.

3. Petitioner did not timely file returns for the period in question. On October 16, 1995, Respondent issued a Statutory Notice assessing Petitioner individual income tax, penalties and interest based on a non-filing audit. The assessment was based on information Respondent obtained from the Internal Revenue Service for one of the years in question, the assessment for the remaining years was based on projections factored according to the Consumer Price Index. The total tax assessed for the years 1988 through 1993 was $$$$$. The interest was $$$$$ which continues to accrue on the unpaid balance. The penalties assessed for all years in question totaled $$$$$. The penalties assessed were a 10% failure to file penalty and the 15% intentional disregard of the law penalty.

4. In March 1997, the day prior to the scheduled Formal Hearing, Petitioner filed Utah individual income tax returns for the years 1989 through 1992. The returns indicated that Petitioner owed a total in taxes of $$$$$ for the years 1988 through 1992. For 1988, it was Petitioner's position that he did not have sufficient income to be required to file. Petitioner had not yet filed his return for 1993 and he explained that he had been waiting for information from an employer. Petitioner did not provide copies of his federal returns for the years in question. Also it was unclear whether W-2's had been included with the returns.

5. Respondent was willing to accept the returns as filed upon verification that they were correctly calculated based on the federal taxable income. For this verification, Respondent had requested copies of the federal returns for the years in question and copies of the W-2s. Petitioner had not provided the copies up to the point of the March 19, 1997 hearing, but Petitioner maintained that he was not aware he needed to supply copies of the federal returns. The hearing was continued and rescheduled on June 4, 1997, to allow Petitioner the opportunity to submit copies of the federal returns. Petitioner did not do so and did not appear when the hearing reconvened on June 4, 1997.

6. At the hearing representatives for Respondent stated that if they received copies of the federal returns and W-2's as verification that Petitioner's returns for 1989 through 1992 were correctly calculated, then they would adjust the assessment to the amount claimed in Petitioner's returns.

7. Petitioner testified at the March 19, 1997 hearing that the reason he had not filed the returns timely was that he had been going through a difficult time financially. He testified that in 1988 he and his wife lived on student loans. Petitioner found employment in Utah in 1989 through 1993 and most of his tax liability was paid by withholdings from his pay checks.

CONCLUSIONS OF LAW

A tax is imposed on the state taxable income of every resident individual for each taxable year. (Utah Code Ann. '59-10-104).

Resident individual is defined in Utah Code Ann. '59-10-103(1)(j) as follows:

A "resident individual" is either:

(I) an individual who is domiciled in this state for any period of time during the taxable year; or

(ii) an individual who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate 183 or more days of the taxable year in this state.

With a few exceptions which are not applicable to this appeal, the Utah Legislature has specifically provided that the taxpayer bear the burden of proof in income tax proceedings before the Tax Commission. (Utah Code Ann. '59-10-543.)

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(8).)

DECISION AND ORDER

Petitioner was a Utah resident during the audit period of 1988 through 1993 and is therefore liable for income tax to the State of Utah. Petitioner has the burden of proving that the non-filing audit assessment is incorrect. Petitioner has now filed returns for the years 1989 through 1992 but he has not provided the requested verification of his taxable income. Petitioner asserts that he had insufficient income to be required to file for 1988 but has not filed a Utah individual income tax return to substantiate this claim. For these reasons Petitioner has not met his burden of proof. Respondent maintains that it will adjust the assessment when sufficient verification of taxable income is provided by Petitioner.

Concerning the penalties, financial hardship is not allowed as grounds for waiver or reduction of penalties. Interest is waived only in the event of Tax Commission error.

Based upon the foregoing, the Tax Commission sustains the audit assessment of tax, penalties and interest, in its entirety, as set out in the Statutory Notice dated October 16, 1995, subject to revision if Petitioner provides verification of taxable income with copies of the W-2's and federal returns within forty-five days from the date of this Decision. For the 1988 tax year the assessment will be sustained unless Petitioner files within the forty-five day period a Utah individual return. In addition for the 1993 tax year Petitioner needs to file a Utah return as well as provide a copy of the federal return and W-2's within this same forty-five day period. If Petitioner provides such verification during this time period the assessment will be amended to reflect the amounts claimed on the Utah individual income tax returns filed by Petitioner for each year that verification is submitted. It is so ordered.

DATED this 29^th day of July , 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Pam Hendrickson

Commissioner Commissioner