If I trusted my accountant to file and pay my taxes and they didn't, am I still on the hook for the late penalty and interest?

Plain-English summary

Arthur Trujillo owed $1,781 in New Mexico personal income tax for 2019 and did not dispute the tax itself. What went wrong was getting it filed and paid on time. He prepared a check in June 2020 and expected his accountant to file the return and pay the tax on his behalf. The return was never filed, and the check was never cashed. Trujillo only discovered the problem later, and in January 2021 he signed and filed the return himself and paid the $1,781 — but by then it was months past the deadline.

The Department assessed a $249.34 late penalty, a separate $42.90 underpayment penalty, and $29.52 in interest. Trujillo protested, then largely conceded — he agreed he owed the penalties and interest and intended to pay them. The Administrative Hearings Office denied the protest.

Two points carry the decision. First, New Mexico's penalties and interest are mandatory — the statutes say they "shall" be added, leaving no discretion to waive them out of sympathy. Second, and most useful for other taxpayers: by regulation, a failure to file "is not excused by the taxpayer's reliance on an agent." Handing the job to an accountant does not shift the legal responsibility off the taxpayer, and a check that was written but never cashed is not a payment. Because the $1,781 tax had already been paid by the time of the decision, only the $321.76 in penalties and interest remained outstanding.

What this means for you

Anyone who relies on an accountant, bookkeeper, or preparer

Delegating your filing does not delegate the legal responsibility. If your preparer misses the deadline — or, as here, simply never files — New Mexico still holds you liable for the late penalty and interest, because reliance on an agent does not excuse a failure to file. Confirm that returns were actually filed and payments actually cleared; don't assume "I gave it to my accountant" is the end of your obligation. (Note this is stricter than the rule for some other penalties, where reasonable reliance on a professional's advice can show non-negligence — a total failure to file is treated differently.)

Anyone who mailed or prepared a check that was never cashed

Writing a check is not paying the tax; the payment has to actually reach and be processed by the Department. If a check you sent has not cleared within a reasonable time, follow up immediately — a stale, uncashed check leaves your tax unpaid and the penalty and interest clock running.

Accountants and tax professionals

Regulation 3.1.11.11 NMAC's "failure to file is not excused by reliance on an agent" language is dispositive here and worth flagging to clients who assume delegation is a defense. Note also the two distinct penalties: the standard §7-1-69(A) late penalty (2% per month or fraction, up to 20%) and the separate §7-2-12.2 income tax underpayment penalty, assessed here as $249.34 and $42.90 respectively. Both, plus §7-1-67 interest, are mandatory. Once a taxpayer concedes liability, there is nothing left to overcome the §7-1-17 presumption of correctness.

Common questions

Q: My accountant was supposed to file and pay — why am I penalized?
A: Because New Mexico regulation says a failure to file "is not excused by the taxpayer's reliance on an agent." The obligation stays with you. If the return isn't filed or the tax isn't paid on time, the late penalty and interest apply even if your preparer was at fault.

Q: I wrote a check on time. Doesn't that count as paying?
A: No. A check that is prepared but never cashed does not pay the tax. Payment must actually reach and be processed by the Department. Here the taxpayer's June 2020 check was never cashed, so the tax stayed unpaid until he paid it directly in January 2021.

Q: What is the "underpayment penalty" — is it different from the late penalty?
A: Yes. In addition to the standard late-filing/late-payment penalty under §7-1-69, New Mexico assesses a separate income tax underpayment penalty under §7-2-12.2. In this case they were $249.34 and $42.90, assessed on top of each other.

Q: If I eventually pay the tax, do the penalties and interest go away?
A: No. Paying the tax stops further interest and penalty from accruing on the principal, but the penalties and interest already earned by the late payment remain due. Here the tax was paid but $321.76 in penalties and interest still had to be paid.

Q: Does this decision apply to my situation?
A: Not automatically. A Decision and Order resolves one taxpayer's protest on its specific facts and the law in effect at the time. It shows how the Administrative Hearings Office reasons, but it binds only the parties to that protest, and your facts may differ.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-2-3 — personal income tax on residents' net income
• NMSA 1978, § 7-2-2 — New Mexico income based on federal adjusted gross income
• NMSA 1978, § 7-2-12 — when income tax returns are due
• NMSA 1978, § 7-1-69(A) (2007) — mandatory late-filing/late-payment penalty
• NMSA 1978, § 7-2-12.2 (2011) — income tax underpayment penalty
• NMSA 1978, § 7-1-67(A) (2013) — mandatory interest
• NMSA 1978, § 7-1-17 (2007) — assessment presumed correct
• NMSA 1978, § 7-1-3(Z) (2019) — "tax" includes penalty and interest
• NMSA 1978, § 7-1B-8 (2019) — 90-day hearing requirement
• Regulation 3.1.11.11 NMAC (2001) — non-negligence factors; reliance on an agent does not excuse a failure to file
• Regulation 3.1.6.13 NMAC (2001) — presumption of correctness extends to penalty and interest

Cases cited:

• El Centro Villa Nursing Ctr. v. Taxation & Revenue Dep't, 1989-NMCA-070 ("tax" includes penalty and interest)
• N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (taxpayer's burden to overcome presumption)
• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013 ("shall" is mandatory)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Arthur and Elaine Trujillo
• Decision PDF: D&O 21-20

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 IN THE MATTER OF THE PROTEST OF
5 ARTHUR & ELAINE TRUJILLO
6 TO THE ASSESSMENT
7 ISSUED UNDER LETTER ID NO. L1306649008

8 v. AHO No. 21.05-037A, D&O No. 21-20

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On August 3, 2021, Hearing Officer Dee Dee Hoxie, Esq. conducted a videoconference

12 hearing on the merits of the protest to the assessment. The Taxation and Revenue Department

13 (Department) was represented by Kenneth Fladager, Staff Attorney, who appeared by

14 videoconference. Alma Tapia, Auditor, also appeared by videoconference on behalf of the

15 Department. Arthur Trujillo (Taxpayer) appeared by telephone and represented himself. The

16 Taxpayer and Ms. Tapia testified. The Hearing Officer took notice of all documents in the

17 administrative file. The Department’s exhibits “A” (press release); “B” (tax record); “C”

18 (return); “D” (tax record); and “E” (updated liability) were admitted1.

19 The main issue to be decided is whether the Taxpayer is liable for the penalty and

20 interest. The Hearing Officer considered all of the evidence and arguments presented by both

21 parties. Because the Taxpayer failed to overcome the presumption of correctness and essentially

22 conceded on all issues, the Hearing Officer finds in favor of the Department. IT IS DECIDED

23 AND ORDERED AS FOLLOWS:

24 FINDINGS OF FACT

1
Citations to exhibits will be “Ex.” followed by their respective letter.
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Case No. 21.05-037A
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1 1. On February 8, 2021, the Department issued an assessment to the Taxpayer for

2 the tax period ending December 31, 2019. The assessment was for personal income tax of

3 $1,781.00, penalty of $249.34, underpayment penalty of $42.90, and interest of $29.52, for a

4 total liability of $2,102.76. [Admin. file L1306649008].

5 2. On March 8, 2021, the Taxpayer filed a timely written protest. [Admin. file

6 protest].

7 3. On March 23, 2021, the Department acknowledged its receipt of the protest.

8 [Admin. file].

9 4. On May 25, 2021, the Department filed a request for hearing with the

10 Administrative Hearings Office. [Admin. file request].

11 5. The hearing was conducted on August 3, 2021, which was within 90 days of the

12 request as required by statute. [Admin. file].

13 6. The Taxpayer filed his 2019 personal income tax return on January 13, 2021.

14 [Testimony of Taxpayer; Testimony of Ms. Tapia; Ex. C; Ex. D].

15 7. The Taxpayer paid the $1,781.00 tax due when he filed his return. [Admin. file;

16 Testimony of Taxpayer; Ex. E].

17 8. Returns for the 2019 tax year were due on July 15, 2020, but taxes were still due

18 on April 15, 2020. [Testimony of Ms. Tapia; Ex. A].

19 9. Therefore, the Taxpayer’s taxes were paid late, and the Taxpayer’s return was

20 filed late. [Testimony of Taxpayer; Testimony of Ms. Tapia; Ex. A; Ex. C; Ex. D; Admin. file].

21 10. The Taxpayer prepared a check for the taxes to be paid on June 8, 2020.

22 [Testimony of Taxpayer; Admin. file].

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Case No. 21.05-037A
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1 11. The Taxpayer expected his accountant to pay and file the taxes on his behalf.

2 [Testimony of Taxpayer].

3 12. The Taxpayer could not prove that the accountant filed the return or paid the taxes

4 when they were due in 2020. [Testimony of Taxpayer].

5 13. The Taxpayer became aware that the check to the Department prepared in June

6 2020 had not been cashed. [Testimony of Taxpayer].

7 14. The Taxpayer then signed and filed the return with the tax payment in January

8 2021. [Testimony of Taxpayer; Ex. C].

9 DISCUSSION

10 Burden of proof.

11 Assessments by the Department are presumed to be correct. See NMSA 1978, § 7-1-17

12 (2007). By definition, tax includes the amount of tax principal and “the amount of any interest

13 or civil penalty relating thereto”. NMSA 1978, § 7-1-3 (Z) (2019). See also El Centro Villa

14 Nursing Ctr. v. Taxation and Revenue Dep’t, 1989-NMCA-070, 108 N.M. 795. The

15 presumption of correctness also applies to the assessment of penalty and interest. See 3.1.6.13

16 NMAC (2001). Therefore, the Taxpayer has the burden to prove that he is entitled to an

17 abatement, in full or in part, of the assessment issued in the protest. See N.M. Taxation &

18 Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8.

19 Personal income tax.

20 New Mexico imposes a personal income tax upon the net income of every resident. See

21 NMSA 1978, § 7-2-3. New Mexico’s adjusted gross income is based on the person’s federal

22 adjusted gross income. See NMSA 1978, § 7-2-2. The Taxpayer admits that he owed New Mexico

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Case No. 21.05-037A
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1 personal income tax for the 2019 tax year and that he filed his return and payment late. The

2 Taxpayer admits that he has no proof to the contrary.

3 Assessment of penalty.

4 When a tax is not paid by the due date or a return is not filed by its due date, “there shall

5 be added to the amount assessed a penalty”. NMSA 1978, § 7-1-69 (A) (2007) (emphasis

6 added). In addition to the standard penalty, underpayments of income tax are also assessed an

7 underpayment penalty. See NMSA 1978, § 7-2-12.2 (2011). The word “shall” indicates that the

8 assessment of penalties is mandatory, not discretionary. See Marbob Energy Corp. v. N.M. Oil

9 Conservation Comm’n., 2009-NMSC-013, ¶ 22, 146 N.M. 24. If a taxpayer is not negligent,

10 penalties may be excused. See 3.1.11.11 NMAC (2001) (listing several factors, such as

11 consulting an accountant, that indicate non-negligence). A failure to file a return “is not excused

12 by the taxpayer’s reliance on an agent”. Id.

13 The Taxpayer concedes that he owes the penalties and intends to pay it. Therefore, the

14 penalties were properly assessed.

15 Assessment of interest.

16 The Taxpayer concedes that he owes the interest and intends to pay it. Interest “shall be

17 paid” on taxes that were not paid on or before the date on which they were due. NMSA 1978, §

18 7-1-67 (A) (2013). Again, the word “shall” indicates that the assessment of interest is

19 mandatory. See Marbob Energy Corp., 2009-NMSC-013.

20 CONCLUSIONS OF LAW

21 A. The Taxpayer filed a timely written protest to the Notice of Assessment issued under

22 Letter ID Number 1306649008, and jurisdiction lies over the parties and subject matter of this

23 protest.

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1 B. The hearing was conducted within 90 days of the request for hearing. See NMSA

2 1978, § 7-1B-8 (2019).

3 C. The Taxpayer filed and paid his 2019 tax return in January 2021, several months

4 late. See Ex. A. See also NMSA 1978, § 7-2-12.

5 D. The Taxpayer failed to overcome the presumption that the assessment was correct.

6 See NMSA 1978, § 7-1-17. See also 3.1.11.11 NMAC.

7 For the foregoing reasons, the Taxpayer’s protest IS DENIED. IT IS ORDERED that

8 Taxpayer is liable for a total outstanding liability of $321.762.

9 DATED: August 20, 2021.

10 Dee Dee Hoxie
11 Dee Dee Hoxie
12 Hearing Officer
13 Administrative Hearings Office
14 P.O. Box 6400
15 Santa Fe, NM 87502

16 NOTICE OF RIGHT TO APPEAL

17 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

18 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

19 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

20 Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

21 the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

22 Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

23 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

2
The tax principal was already paid, and only the penalties and interest remain outstanding. See Ex. E.
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1 Hearings Office may begin preparing the record proper. The parties will each be provided with a

2 copy of the record proper at the time of the filing of the record proper with the Court of Appeals,

3 which occurs within 14 days of the Administrative Hearings Office receipt of the docketing

4 statement from the appealing party. See Rule 12-209 NMRA.

5 CERTIFICATE OF SERVICE

6 On August 20, 2021, a copy of the foregoing Decision and Order was submitted to the

7 parties listed below in the following manner:

8 Email Interdepartmental Mail

9 INTENTIONALLY BLANK

10
11 John Griego
12 Legal Assistant
13 Administrative Hearings Office
14 P.O. Box 6400
15 Santa Fe, NM 87502

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