96-2360

Income Tax

Signed 5/1/97

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, :

Petitioner, : DECISION

v. :

AUDITING DIVISION OF THE : Appeal No. 96-2360

UTAH STATE TAX COMMISSION, :

: Account No. #####

Respondent. : Tax Type: Income Tax

_____________________________________

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 adjudicative proceeding. A hearing was held on April 21, 1997. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Petitioner was present and represented himself. Present and representing Respondent were PETITIONER REP. and PETITIONER REP.

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

FINDINGS

Additional tax, penalties of $$$$$ and interest of approximately $$$$$ were assessed against Petitioner relating to his income tax for the year 1992. Petitioner is appealing the assessment of the penalties and interest. The assessment was based on an increase of Petitioners' federal taxable income as determined by the Internal Revenue Service (IRS). Petitioners did not file an amended return with the State of Utah based on the IRS adjustment, as is required by law. Respondent eventually caught the adjustment in its tape match with the IRS and issued the Statutory Notice on October 15, 1996, assessing additional tax, interest and penalty.

At the hearing Petitioner explained that he had filed his federal and state income tax returns according to the information that he had at the time. Later the IRS informed him of the error. He was unaware that he should have filed an amended Utah return after the changes made to his federal return.

Further, Petitioner made a Motion to Default Respondent, based on the fact that Respondent had not complied with the Commission's Notice, dated December 13, 1996. Respondent had not submitted a written response within 30 days as requested in the Notice. The written response was not submitted in this matter until March 10, 1997. Petitioner stated that it was unfair to assess penalty and interest against him based on requirements or which he was not aware, while the Respondent had failed to comply with the requirement to submit a response.

Respondent's representative acknowledged that they did not file the response timely and stated the reason was their volume of work load. They 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. Since Petitioner failed to do so, the 10% negligence penalty was assessed. Interest was assessed at the statutory rate. Respondent requested that the assessment of tax, penalty and interest be sustained.

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

Since this was this was the first time Petitioner was required to file an amended state return resulting from an IRS audit and Respondent failed to timely submit its written response, the Tax Commission will waive the negligence penalty. The Respondent did error in this matter by not submitting a written response within the 30 day period set out in the notice. However, the written response was given to Petitioner more than 30 days prior to the hearing so Petitioner had sufficient time to review the response in preparation for the hearing. For this reason Petitioner was not sufficiently prejudiced by the action to justify a Default against Respondent.

Based on the forging the Tax Commission finds sufficient cause exists to waive the 10% negligence penalty associated with the Petitioner's 1992 income tax. However, the Tax Commission sustains the assessment of additional tax and interest for that year. It is so ordered.

DATED this 1 day of MAY, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

_____________________________

Jane Phan

Administrative Law Judge

The agency has reviewed this case and the undersigned concur in this decision.

DATED this 1 day of MAY, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner