An Overview of New Mexico Tax Resolution Options

The Taxation and Revenue Department of New Mexico (TRD), a state tax agency, administers all state and city level taxes. These taxes include the state income tax, state gross receipts tax, local gross receipt taxes, state and local property taxes, and other taxes related to the processing or production of natural resources.

Collections

The TRD is responsible for the collection of taxes in the state of New Mexico. Before enforced collection, TRD will attempt to notify the taxpayer and collect the tax liability by sending notices, calling the taxpayer, or in some circumstances conducting a field visit. The TRP typically conducts field visits at business locations, but since the Covid pandemic, most interactions throughout the collection process can be conducted over the phone. Though individual taxpayers may be subject to a field visit, it typically only happens if the notices issued go unanswered. If the taxpayer will not resolve the tax liability with the TRD after these collection tactics have been exhausted, levies and liens on assets and income usually follow.

In some cases, the TRD will send the account to an outside collection agency. Before this happens, the TRD will mail a notice to the taxpayer informing them that their account is moving to a collection agency. Once that account moves to a collection agency, the taxpayer must work with that collection agency to resolve their tax issues.

How Tax Liabilities Generally Arise

In most cases, taxpayers find themselves owing back taxes if they file a tax return and could not pay the tax balance due. Taxpayers may also owe if they were subject to an audit, and the TRD assessed an additional tax. The last cause of most tax liabilities with the TRD is when taxpayers fail to file a tax return, and the TRD estimated income tax liability based on information obtained from the IRS.

Taxpayers should not ignore delinquent tax filing and payment issues and the corresponding assessment or collection notices from the state of New Mexico. Because of the aggressive collection tactics utilized by the TRD, taxpayers should seek a qualified tax professional to represent them in these matters. Past-due tax liabilities can become significant problems very quickly as penalty, interest, and collection fees increase the entire balance owed over time. If the taxpayer and/or their representative is not proactive with addressing the debt, please note that the state will begin enforced collection via liens, levies, and garnishments.

Contact Information for the New Mexico Taxation and Revenue Department:

• Individual Tax Assistance: (505) 827-0827
• Business Tax Assistance: (505) 476-3683
• General Inquiries: 1-866-285-2996
• Collections: 1-866-285-2996
• Website: New Mexico Taxation and Revenue Department

A Review of Some NM State Tax Resolution Options

One simple solution for dealing with back taxes with the New Mexico TRD is to enter into a monthly payment plan. With that said, there are other additional options available such as:

• Protests
• Compromises
• Penalty Abatements
• Innocent Spouse Relief
• Temporary Hardship Status

The options listed are not all-inclusive, but these courses of action can reduce or resolve tax liabilities in certain circumstances.

Protesting the Assessment

If New Mexico assesses additional tax due against a taxpayer, there are two options available to dispute the assessment. New Mexico makes these options mutually exclusive, meaning that once the taxpayer chooses one option, they cannot pursue the other. The two options are:

1. forego paying the proposed assessment at this time and file a written protest or
2. pay the liability and file a refund claim.

It is important to reiterate that the New Mexico Tax Administration Act does not allow you to pay an assessed tax “under protest,” so you cannot combine the two options.

A taxpayer must file a written protest within 90 days from the date on the notice of assessment. Form ACD-31094 provides instructions and information for submitting the written protest.

Additionally, taxpayers have the option to request both an informal and formal hearing on the issues. If the taxpayer cannot reach a tax resolution, he or she may appeal the Department’s denial ruling to the New Mexico Court of Appeals. Taxpayers must file appeals within 30 days from the date the Department issued its denial or when the hearing officer’s ruling became final. Taxpayers cannot submit new evidence to the Court of Appeals, therefore, it is critical to assert all facts in support of the tax challenge in the original protest.

Taxpayers must make a claim for a refund after they satisfy the entire tax liability, and within three years from the end of the calendar year the tax was due, or in which the taxpayer paid the additional assessment. For refund claims TRD denies, taxpayers can either file a protest with the TRD in the same manner as discussed above or file a lawsuit in the Santa Fe District Court. The taxpayer must file either appeal option within 90 days from the date of the TRD refund denial mailing.

Taxpayer Bill of Rights

Taxpayers should be aware of their rights in dealings with the TRD. New Mexico has codified certain rights that are guaranteed to taxpayers, regardless of whether they hire someone to represent them. These rights are called the Taxpayer Bill of Rights and are as follows:

• The right to available public information and prompt, courteous tax assistance;
• The right to representation by counsel or another qualified representative at any time during your contacts with the TRD or with the Administrative Hearings Office;
• The right to have audits, inspections of records, and meetings take place at a reasonable time and place;
• The right to have the Department conduct its audits in a timely and efficient manner and be entitled to the correct calculation of interest as provided in the Tax Administration Act;
• The right to simple, non-technical information explaining procedures, remedies, and rights during an audit, protest, appeals, and collection proceedings;
• The right to an explanation of audit results and the basis for audits, assessments, or denials of refund that identify tax, interest or penalty due;
• The right to seek review, through formal or informal proceedings, of findings or unfavorable decisions that occur during audit or protest procedures;
• The right for your tax information to remain confidential unless otherwise specified by law;
• The right to abatement (forgiveness) of an assessment of taxes that have been incorrectly, erroneously, or illegally made, and a right to seek a compromise of stated tax liability. When the Secretary of Taxation and Revenue in good faith doubts that you owe the amount claimed, you have the right to seek compromise if a way exists in your particular case;
• The right to clear information about penalties if a tax assessment is not paid, secured, protested, or otherwise provided for. If you become a delinquent taxpayer, upon notice of delinquency you have the right to timely notice of collection actions that require sale or seizure of your property under the Tax Administration Act, and
• The right to ask to pay your tax obligations by installment agreements.

Compromise of Incorrect Tax Balance

The enacted Taxpayer Bill of Rights, as provided above, states that it is a right of the taxpayer to be allowed to seek a compromise of taxes owed. However, this language is curtailed by the subsequent sentence, which states, “When the Secretary of Taxation and Revenue in good faith doubts that you owe us the amount we claim, you have the right to seek compromise if a way exists in your particular case.” Therefore, it is important to note that this program only addresses an incorrect tax balance, not an inability to pay the debt owed.

Payment Plan

Taxpayers who are unable to challenge an additional assessment successfully or are unable to pay a specific tax liability in full should enter into a payment plan to address the balance owed. While interest and penalties will normally continue to accrue while the taxpayer is in a payment plan, subsequent aggressive collection activities will not be taken as long as the taxpayer sets up a payment plan and remains current in the approved payment plan. If the taxpayer establishes a payment plan for 12 months or less, in most cases, a tax lien can be avoided. However, for repayment plans longer than 12 months, a tax lien will generally be filed.

The TRD offers two types of payment plans:

1. Short-term payment plan (12 months or less repayment terms)
2. An Installment Agreement 

The TRD offers flexible monthly payment terms for both types of payment plans. Taxpayers can agree to equal monthly payments, fluctuating payments (intending to accommodate those with seasonal income), or increased monthly payments throughout the length of the agreement. Generally, the TRD will ask to review the taxpayer’s financial information before accepting a payment plan.

You can read more about NM state payment plans here.

Penalty Abatement

New Mexico charges delinquent taxpayers both penalty and interest on past-due tax liabilities. The tax penalty is 2% per month of the unpaid principal tax liability up to a maximum charge of 20%. Interest accrues daily on the outstanding principal tax liability owed to the TRD. The interest rate charged is established on a quarterly basis and fluctuates to reflect the same level being charged by the Federal Government on similar unpaid taxes.

Taxpayers can seek abatement of any penalty assessed by the TRD via a written request. Taxpayers must provide supporting evidence that they were not acting negligently in failing to file or pay the delinquent tax liability that caused the TRD to assess the penalty. Generally, this means that the taxpayer was acting in good faith and would have otherwise been compliant if not for an event occurring outside of the taxpayer’s control. 

The TRD will not consider abatement of interest under any circumstance.

Innocent Spouse Relief

New Mexico will allow the spouse of a delinquent taxpayer to seek relief from the liability under certain circumstances. The TRD, like the IRS, refers to this as “innocent spouse relief.” The TRD uses the same legal basis for making innocent spouse relief determinations as those published by the IRS (ie, on a case-by-case basis). Generally, a taxpayer who has already been granted innocent spouse relief by the IRS will have their New Mexico request accepted as well. While the TRD reserves the right to make innocent spouse decisions on a case-by-case basis, they provide the following factors that are weighed heavily in making the determinations:

• Did the spouse or former spouse know about the tax liability at the time it arose?
• Did the spouse or former spouse have a meaningful opportunity to contest the assessment of tax at the time the assessment was made?
• Has the spouse or former spouse cooperated with the Department in collection and compliance efforts?
• Can the state protect its interests without pursuing active collection efforts against the spouse or former spouse, including collection efforts against the other spouse or former spouse?

The IRS requires that taxpayers meet the following requirements to qualify for innocent spouse relief, which is also a threshold requirement for New Mexico.

• The taxpayer filed a joint return.
• There is an understated tax on the return that is due to erroneous items of your spouse (or former spouse).
• The taxpayer can show that when they signed the joint return, they did not know and had no reason to know that the understated tax existed (or the extent to which the understated tax existed).
• Taking into account all the facts and circumstances, it would be unfair to hold the innocent taxpayer liable for the understated tax.

Temporary Hardship Status

Taxpayers who demonstrate to the TRD that they do not currently have the ability to pay their tax obligations can look to be put into a temporary hardship status. Taxpayers can call the TRD for more information and submit an application if they can prove they cannot currently make payments.

Taxpayer Advocate

New Mexico has a program called the Taxpayer Advocate Program. It helps taxpayers who have legitimate issues in communication or dealing with the TRD. The Taxpayer Advocate Program has a long-term goal to identify systemic problems within the TRD and to recommend long-term solutions for solving those problems. The New Mexico Taxpayer Advocate Program can help taxpayers by coordinating communications between them and the TRD. They can ensure that taxpayers' rights are upheld under the Taxpayer Bill of Rights. Moreover, they can advocate on the taxpayers’ behalf for a resolution.

Finding Help

To find a tax professional who can help with New Mexico tax problems, start your search below and filter by the appropriate agencies and problems you are facing to find the highest-rated tax professionals. You can also navigate to this page, which lists the top-rated tax professionals located in New Mexico.

Disclaimer

Reading this article does not create an attorney-client relationship. This article should not be used as a substitute for the advice of a competent attorney or tax professional.