96-0654

Income

Signed 7/19/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, : ORDER

:

v. : Appeal No. 96-0654

:

COLLECTION DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

:

Respondent. : Tax Type: Income

_____________________________________

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 by telephone conference call was XXXXX. Present and representing Respondent was XXXXX.

Petitioner is appealing the assessment of penalties totaling $$$$$ relating to his income tax for XXXXX. Petitioner is not contesting the interest of approximately $$$$$. The penalties assessed were a $$$$$ late payment penalty and a $$$$$ late filing penalty.

Petitioner explained that he was not a Utah resident, but that he received income from a number of different companies. It is impossible for him to determine whether or not a portion of the income is taxable in Utah until he receives all the K-1's. He says the auditors are unable to complete the K-1's until September. Prior to the completion of the returns, he has no idea what he owes to which state. Petitioner asserts that XXXXX was the second year he had to file in Utah. He stated that it was unfair to charge penalties on something he is not aware of until his return is completed in October and that because of these special circumstances the penalties should not be assessed against him.

Respondent's representative explained that Respondent would treat Petitioner's situation as though he had filed a valid extension and recommemded reduction of the penalty to the underpayment penalty of $$$$$. The underpayment penalty is XXXXX of the unpaid balance per month from April 15. She explained that in Utah an extension is an extension to file not an extension to pay. Tax liability has to be paid by making a prepayment of at least 90% of the current year's liability or 100% of the prior year's liability. She explained that when taxpayers are unsure of the amount of their tax liability they should make a prepayment in the amount of 100% of the prior year's liability. Tax paid in excess of the ultimate liability would be refunded.

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

The Utah Legislature has provided for taxpayers who are unable to estimate their tax liability on April 15, by allowing a prepayment equal to 100% of the prior year's liability. Had Petitioner made the appropriate prepayment no penalties would have been assessed. Interest is assessed based on the time value of money.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds sufficient cause has been shown to reduce the penalties to an underpayment penalty of $$$$$. Petitioner was not appealing 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 19 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