96-2175

Income

Signed 12/20/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, :

:

Petitioner, : INFORMAL DECISION

:

v. :

:

AUDITING DIVISION OF THE : Appeal No. 96-2175

UTAH STATE TAX COMMISSION, :

: Account No. #####

: #####

Respondent. : Tax Type: Income

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission pursuant to the Administrative Procedures Act and the rules of the Utah State Tax Commission for informal proceedings. An Informal Hearing was held on MMDDYY. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner by telephone conference call was PETITIONERS REP.. Present and representing Respondent were XXXXX and XXXXX of the Auditing Division. The matter had originally been scheduled for a Status Conference but was converted to the Informal Hearing in this matter by the Administrative Law Judge with the approval of the parties.

Based upon the evidence in the file and presented at the Informal Hearing, the Commission makes its:

FINDINGS

Petitioners are appealing the assessment of interest relating to their 19YY Utah individual income tax. The amount of the interest is approximately $$$$$.

Petitioner explained that they had completed their Utah return for 19YY and it indicated that they were due a refund of $$$$$. However, due to a data entry error when the return was processed by Tax Commission employees, a much larger refund was issued to Petitioners with a notice which stated that Petitioners had made an error on their return. The notice did not explain what the error was. Petitioner stated that there had been a lot of discussion on the news of a state tax surplus so they assumed that the Tax Commission was correct in refunding to them the larger amount.

Later Petitioner's were audited because the data entry error did not match what was on their federal return. At this point the error was discovered and Petitioners were required to repay to the Tax Commission the portion of the refund issued to them in error. Respondent assessed interest on the refund given to Petitioner in error and this interest is the subject of the appeal. It was Respondent's position that the assessment of interest should be upheld. Respondent's representatives explained that while line 5, itemized or standard deductions claimed on federal return, read $$$$$, it reasonably appeared to be $$$$$ and it had been entered by the data processor as $$$$$. They explained that when processing the individual income tax returns not all of the lines are entered into the system so the discrepancy was not discovered. Apparently, Tax Commission employees issued the refund, even though it was significantly larger than the refund claimed on the return, without reviewing the entire return.

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

An error on the part of the Tax Commission, or Tax Commission employee is generally considered to be reasonable cause for the purpose of waiving interest. The facts as presented indicate the interest assessment arose from a Tax Commission error. The Tax Commission finds sufficient cause has been shown to waive the interest associated with Petitioners 19YY income tax. It is so ordered.

DATED this 20th day of December, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner