INCOME

97-0134

Signed 2/23/98

BEFORE THE UTAH STATE TAX COMMISSION

_____________________________________________

PETITIONER, )

Petitioner, ) DECISION

v. )

AUDITING DIVISION OF THE ) Appeal No. 97-0134

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 provisions of Utah Code Ann. '59-1-502.5 An Initial Hearing was held on February 11, 1998. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Petitioner was present and represented herself. Present and representing Respondent were Frank Hales and Dan Engh of the Auditing Division.

Petitioner is appealing the assessment of $$$$$ in penalties and approximately $$$$$ in interest relating to her 1989 income taxes. Petitioner had filed her 1989 Utah individual income tax return timely. Subsequently, in 1992, the Internal Revenue Service (IRS) audited Petitioners federal return and increased her federal taxable income. The audit was complete in 1993. Petitioner understood that this would have some affect on her 1989 Utah return. Petitioner maintains that after the IRS completed its audit in 1993, she telephoned the Utah State Tax Commission to find out how she should proceed. She states that she spoke with XXXXX, a Utah State Tax Commission employee, and it was her understanding from the conversation that the State Tax Commission would calculate the additional tax and send her notice of the amount she owed. This information is clearly erroneous as by statute it is the responsibility of the taxpayer to calculate the additional tax amount and file an amended return within 90 days of the finalization of the IRS audit. Respondent was unable to confirm or deny the telephone conversation.

In 1994, after receiving information from the IRS, the Tax Commission did attempt to notify Petitioner of the deficiency but the notice was mailed to the address given by the IRS which was incorrect. To complicate matters further, Petitioner had been filing Utah returns but due to a typographical error on the part of her tax preparer the returns had an incorrect social security number. Eventually, the Tax Commission retained Petitioners 1995 tax refund to pay the 1989 deficiency and issued to Petitioner a notice stating that she owed an additional $$$$$ for 1989. Petitioner paid this amount thinking it was payment in full. Then for some unexplained reason the 1995 refund was taken back out of the Tax Commission accounts and given to Petitioner, leaving an additional balance for 1989.

The failure to file an amended return after the IRS audit was the Petitioner's first error in filing or paying Utah income tax.

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

The Tax Commission finds sufficient cause has been shown due to first time error and the other complicating circumstances to waive the $$$$$ in penalties from Petitioner's 1989 income taxes. The Commission also finds that the interest should be waived which accrued from June of 1993 going forward based on Tax Commission error. It was unrefuted that a Tax Commission employee gave Petitioner incorrect information over the telephone. It is so ordered.

This Decision does not limit a party's right to a Formal Hearing. Any party to this case may file 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, UT 84134

Failure to request a Formal Hearing will preclude any further appeal rights in this matter.

DATED this 23 day of February, 1998.

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 24 day of February, 1998.

BY ORDER OF THE UTAH STATE TAX COMMISSION.