96-0542

Income Tax

Signed 7/1/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, : ORDER

:

v. : Appeal No. 96-0542

:

COLLECTION 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. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX. Present and representing Respondent was XXXXX.

Petitioner is appealing the assessment of a penalty of $$$$$ and interest of approximately $$$$$ relating to the late payment of income tax for XXXXX. The penalty was a XXXXX late payment penalty.

Petitioner requested that the penalty and interest be waived based on bank error. He explained that he made a deposit of $$$$$ on XXXXX to cover the state and federal taxes. However, the bank's computer was down and the deposit was not posted until XXXXX. The check to the Utah State Tax Commission was presented on XXXXX and did not clear the account because of insufficient funds. Petitioner said after he was informed by the bank that the check had not cleared, he contacted the bank and learned that the bank had erred by not posting the deposit on XXXXX. He thought the Tax Commission would send the check through a second time so he did not contact the Tax Commission about the bounced check. When he realized the check had not cleared his account by XXXXX, he says he contacted the Tax Commission, and in XXXXX mailed a new check. Petitioner provided a letter from his bank which did acknowledge that the deposit should have been posted on XXXXX and had it been posted correctly the original check would have cleared.

Respondent's representative requested that the penalty and interest be upheld. She pointed out that the return was filed timely and the funds should have been available on the due date, so technically the bank deposit on XXXXX was late. She explained that at that time it was not Tax Commission policy to resubmit a check a second time. She said that Petitioner had been notified by the Tax Commission of the nonpayment on XXXXX and he did not pay the balance due until XXXXX.

Respondent explained that interest is generally waived only in the event Tax Commission error caused the late payment. There was no indication of Tax Commission error in the facts presented, because it was not Tax Commission policy to resubmit a check returned for insufficient funds.

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

From the information presented, Petitioner was aware that his check had not cleared but did not contact the Tax Commission to determine what needed to be done to correct the matter, until XXXXX, after receiving notice from the Tax Commission. Petitioner states he assumed the check would be resubmitted but he should have confirmed this with the Tax Commission. He could have avoided the accrual of additional interest by contacting the Tax Commission and making payment earlier. However, the check was not cleared due to bank error which is sufficient for some reduction of the penalties.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds sufficient cause been shown to reduce the penalties relating to Petitioner's income tax for the XXXXX tax year from $$$$$ to $$$$$. Sufficient cause was not shown for waiver of the interest.

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 1 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