If I thought my accountant paid my New Mexico estimated tax, can I get the penalties waived when it turns out only my federal tax was paid?

Plain-English summary

Raymond Merrick is a New Mexico cybersecurity government contractor who, in 2022, moved from being a W-2 employee to an independent contractor paid on a 1099 through his single-member LLC, Cybersec Consulting. He hired an accounting firm and, in December 2022, got a confirmation that his 2022 federal estimated tax (Form 1040-ES) had been paid. He assumed that included his New Mexico estimated tax — it didn't. The Department assessed his 2022 personal income tax ($8,812) plus a civil negligence penalty ($1,057.44), an underpayment penalty ($319.37), and interest. He paid the tax and interest after the assessment and then protested only the penalties (about $1,392 total), arguing his reliance on the accountant meant his failure wasn't negligence. The Hearing Officer denied the protest.

New Mexico does recognize a reliance defense: Regulation 3.1.11.11(D) NMAC relieves a negligence penalty when a taxpayer reasonably relied on competent tax advice after full disclosure of all relevant facts. But the reliance has to actually cover the failure. Here it didn't. The email Merrick pointed to confirmed only a federal 1040-ES payment and said nothing about New Mexico. And the engagement letter (a) promised only that the firm would "prepare your 2022 federal and state income tax returns" — not that it would pay anything on his behalf — and (b) was addressed to Cybersec Consulting, the LLC, not to Merrick as an individual. The Hearing Officer emphasized that the owner and the single-member LLC are distinct legal entities, so a promise to the company didn't assure the individual that his personal state tax would be paid. Because the documents he relied on didn't mention New Mexico personal income tax, his belief was not reasonable, the non-payment was negligence, and he couldn't overcome the assessment's presumption of correctness. The underpayment penalty was likewise required because his 1099 income wasn't covered by quarterly estimated payments.

What this means for you

Newly self-employed people (W-2 to 1099)

When you lose payroll withholding, you become responsible for quarterly estimated payments — both federal and state. Paying the federal 1040-ES does not pay your New Mexico tax. Confirm the state piece separately, every quarter.

Anyone relying on an accountant or preparer

The "I relied on my accountant" defense only works if the reliance covers the exact thing that failed. Merrick's proof covered federal tax, not New Mexico. If you're trusting a professional to pay a specific tax, get it in writing that that tax, for that jurisdiction, will be paid — not just that returns will be "prepared."

Business owners with an LLC or other entity

Your business and you are separate legal persons. An engagement letter, promise, or confirmation directed to your LLC is not automatically a promise to you as an individual. Watch whose name is on the document — here, the letter naming the LLC (not the owner) helped sink the reliance defense for the owner's personal tax.

Anyone hoping to abate a negligence penalty

"Preparing" a return is not the same as "paying" the tax, and honest confusion isn't enough. New Mexico's civil penalty is mandatory for negligence — which includes inadvertence and "erroneous belief" — and unsubstantiated statements can't overcome the presumption that the assessment is correct.

Common questions

Q: I thought my accountant paid my New Mexico tax when they paid my federal estimate. Isn't that reasonable reliance?
A: Only if your proof shows the accountant actually handled the New Mexico payment. Merrick's confirmation covered only the federal 1040-ES, so his belief about the state tax was found unreasonable and the penalty stood.

Q: My engagement letter said the firm would handle my "federal and state" returns. Doesn't that cover it?
A: The Hearing Officer read that as a promise to prepare returns, not to pay taxes. Preparing a return and remitting the tax are different things; the letter didn't commit the firm to make payments for him.

Q: The letter was addressed to my LLC, not me. Does that matter?
A: Yes. The individual and the single-member LLC are separate legal entities. A document assuring the company is not, by itself, an assurance to the owner about the owner's personal tax.

Q: I paid the tax as soon as I found out — why do I still owe penalties?
A: Because the penalties are tied to the failure to pay when due. Paying months late (after the assessment) stops further accrual but doesn't erase the civil negligence and estimated-tax underpayment penalties that had already attached.

Q: Can I rely on this decision for my own situation?
A: Not directly. A Decision and Order resolves one taxpayer's protest on its specific facts and is not a general ruling or advisory opinion of the Department. It does illustrate how narrowly the reliance-on-a-professional defense is applied.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-2-3 (1981) — tax imposed on the net income of every resident individual
• NMSA 1978, § 7-1-17(C) (2007) — assessments are presumed correct
• NMSA 1978, § 7-1-69(A) (2007) — mandatory civil penalty for negligence without intent to evade
• NMSA 1978, § 7-2-12.2(B), (G) (2011) — estimated-tax requirement and underpayment penalty
• NMSA 1978, § 7-1-3(Z) (2019) — "tax" includes interest and civil penalty
• NMSA 1978, § 7-1B-8(F) (2019) — 90-day hearing requirement
• Regulation 3.1.11.10 NMAC — definition of "negligence" (includes inadvertence and erroneous belief)
• Regulation 3.1.11.11(D) NMAC — non-negligence indicator: reasonable reliance on competent tax counsel/accountant after full disclosure
• Regulation 3.1.6.13 NMAC — presumption of correctness extends to penalty and interest
• Regulation 3.1.6.12 NMAC — unsubstantiated statements cannot overcome the presumption of correctness

Cases:

• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013 ("shall" makes the penalty mandatory)
• El Centro Villa Nursing Center v. Taxation & Revenue Dep't, 1989-NMCA-070 (Section 7-1-69(A) penalizes unintentional failure to pay)
• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039 (burden of production/persuasion; presumption of correctness)
• Archuleta v. O'Cheskey, 1972-NMCA-165 (assessment presumed correct; taxpayer bears burden)
• N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (trier of fact weighs evidence and credibility)
• MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-21 (burden shifts to Department once presumption rebutted)
• Process Equip. & Serv. Co. v. N.M. Taxation & Revenue Dep't, 2023-NMCA-060 (a single credible witness can be substantial evidence)
• Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50 (agency regulations interpreting a statute get substantial weight)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Raymond Merrick
• Decision PDF: D&O 25-04

Original ruling text

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

4 RAYMOND MERRICK
5 v. Case Number 24.07-023A
6 D&O No. 25-04
7 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

8 DECISION AND ORDER

9 On November 6, 2024, Hearing Officer Ignacio V. Gallegos, Esq., conducted a merits

10 administrative hearing in the matter of the tax protest of Raymond Merrick (“Taxpayer”)

11 pursuant to the Tax Administration Act and the Administrative Hearings Office Act. Raymond

12 Merrick appeared, representing himself. Staff Attorney Jama Fisk appeared at the hearing,

13 representing the opposing party in the protest, the Taxation and Revenue Department

14 (“Department”). Department protest auditor Sonya Varela appeared at the hearing as a witness

15 for the Department. Taxpayer submitted exhibits 1 – 6, and the Department submitted exhibits A

16 – E, at the hearing. The Department submitted exhibit F following the hearing with permission.

17 The exhibits are more fully described in the Exhibit Log, and by reference herein. The hearing

18 officer preserved an audio recording of the hearing.

19 Based on the evidence in the record, after making findings of fact, the hearing officer finds

20 that Taxpayer failed to overcome the presumption of correctness that attached to the Department’s

21 initial assessment, and Taxpayer has also failed to meet the burden of proof to establish proper filing

22 of Personal Income Tax Returns for the tax years in question. The Department established that the

23 Assessment was made timely and properly. Therefore, the Taxpayer’s protest must be denied. IT IS

24 DECIDED AND ORDERED AS FOLLOWS:

In the Matter of the Protest of Raymond Merrick, page 1 of 13.
1 FINDINGS OF FACT

2 Procedural findings

3 1. On September 25, 2023, the Department issued a Notice of Assessment of Taxes

4 and Demand for Payment informing Taxpayer that Personal Income Tax for the tax year ending

5 December 31, 2022, was owed in the amount of $8,812.00, penalty of $1,057.44, interest of

6 $260.25, and underpayment penalty of $319.37 for a total assessment of $10,449.07. [Letter ID#

7 L1770123888; Administrative File; Exhibit A].

8 2. On November 6, 2023, the Department issued a Notice of Pending Collection

9 Action, indicating a total amount due of $10,715.35. [Letter ID # L1070152304; Exhibit B;

10 Administrative File].

11 3. Thereafter, on November 14, 2023, Taxpayer submitted his protest form. The

12 protest challenged the assessment, asserting that he was unaware of the non-payment of the tax,

13 believing that his accountant had submitted payment. Taxpayer paid $9,338.54, covering the

14 underlying tax and interest for the year covered by the assessment on the same day. [Protest

15 letter; Administrative File; Exhibit C; Exhibit D].

16 4. On March 2, 2024, the Department issued a letter acknowledging the protest of

17 personal income tax assessment of penalties in the amount of $1,392.26. The acknowledgment

18 letter identifies the tax penalties for the period ending December 31, 2022. The acknowledgment

19 was issued 109 days after the receipt of protest. [Letter ID# L1925811824; Administrative File;

20 Exhibit E].

21 5. On July 25, 2024, the Department filed a Request for Hearing asking that the

22 Taxpayer’s protest be scheduled for a scheduling hearing. The request for hearing was filed 145

23 days after the acknowledgment letter was issued. [Administrative File].

In the Matter of the Protest of Raymond Merrick, page 2 of 13.
1 6. On July 25, 2024, the Department filed its Answer to Protest, alleging that

2 Taxpayer protested the underpayment penalty ($319.37) and the civil negligence penalty

3 ($1057.44), but the penalties were properly assessed because the payments had not been made

4 timely. In addition, the Department noted that an additional penalty of $176.24 was due because

5 the payment of the underlying tax was not received until November 14, 2023. The Answer to

6 Protest also alleged the Taxpayer’s oversight constituted negligence. [Administrative File].

7 7. On July 26, 2024, the Administrative Hearings Office filed and sent a Notice of

8 Telephonic Scheduling Hearing, setting the matter for a scheduling hearing on August 16, 2024.

9 Notice was provided to the parties by email and USPS First Class Mail. [Administrative File].

10 8. On August 16, 2024, the undersigned Administrative Hearing Officer conducted a

11 scheduling hearing by telephone conference. The Department was represented by Attorney Jama

12 Fisk. The Taxpayer appeared by telephone. An audio recording of the hearing was preserved.

13 Parties agreed that the hearing occurred within 90-days of the Department’s request for hearing.

14 [Administrative File; Hearing Record of 8/16/24].

15 9. On August 19, 2024, the Administrative Hearings Office filed and sent a

16 Scheduling Order and Notice of Administrative Hearing, setting the matter for an in-person

17 merits hearing on November 6, 2024. Notice was provided to the parties by email and USPS

18 First Class Mail. [Administrative File].

19 10. On November 6, 2024, the undersigned Administrative Hearing Officer

20 commenced a merits hearing in the Albuquerque office of the Administrative Hearings Office.

21 The Department was represented by Attorney Jama Fisk. Taxpayer Raymond Merrick appeared

22 representing himself. Taxpayer was his sole witness and Sonya Varela was the Department’s sole

23 witness. The Hearing Officer preserved an audio recording of the hearing. [Administrative File].

In the Matter of the Protest of Raymond Merrick, page 3 of 13.
1 11. Taxpayer’s exhibits and Department’s exhibits were admitted by stipulation of the

2 parties. Exhibits are more specifically described in the Exhibit Log. [Administrative File].

3 12. Following the hearing, on November 13, 2024, the Department provided Exhibit

4 F, a calculation and current balance of penalties outstanding, and Taxpayer did not file an

5 objection to its admission. The exhibit shows civil penalty outstanding of $1,057.44 as of the

6 date of the assessment, underpayment penalty of $319.37 as of the date of the assessment. There

7 were additional penalties and interest of $15.45 which had accrued on the tax principal before the

8 tax principal and interest were paid on November 14, 2023, leaving a total balance of $1,392.26.

9 [Administrative File; Exhibit F].

10 Substantive findings

11 13. Taxpayer is a resident of New Mexico. He is a government contractor providing

12 cyber security services through his company, a single member LLC, Cybersec Consulting LLC.

13 [Examination of R. Merrick; Exhibits 1, 6; Administrative File]

14 14. During tax year 2022, Taxpayer transitioned from a W-2 employee to an

15 independent contractor, receiving a 1099. Taxpayer is not a tax professional and had no prior

16 experience operating a business. [Examination of R. Merrick; Exhibit 1; Administrative File].

17 15. Taxpayer and his company sought and obtained assistance from a professional

18 accounting firm, and signed a contract with the accounting firm, in which the accounting firm

19 pledged, to Cybersec Consulting, that “we will prepare your 2022 federal and state income tax

20 returns.” [Examination of R. Merrick; Exhibit 1, 3; Administrative File].

21 16. In December of 2022, Taxpayer received a notification from the accounting firm.

22 The notification indicated that his personal 2022 Estimated 1040ES had been paid by the

In the Matter of the Protest of Raymond Merrick, page 4 of 13.
1 accounting firm. Taxpayer mistakenly believed that this included 2022 New Mexico estimated

2 tax. [Examination of R. Merrick; Exhibit 5.2; Administrative File].

3 17. The underpayment penalty is a penalty for failure to make timely estimated

4 payments. [Examination of S. Varela].

5 18. The civil penalty is a penalty for failure to pay tax or file a return timely, in this

6 case it was for failure to timely pay the tax due. [Examination of S. Varela].

7 19. The Department received Taxpayer’s payment for 2022 Personal Income Tax

8 (PIT) principal and interest on November 14, 2023, in the amount of $9,338.54. [Examination of

9 R. Merrick; Examination of S. Varela; Exhibit C].

10 20. For tax year 2022, penalties stopped accruing as of the date of the payment of the

11 tax principal, and as of the date of the hearing, the outstanding balance of accrued penalties is

12 $1,392.26. [Examination of S. Varela; Exhibit F (post-hearing exhibit); Administrative File].

13 DISCUSSION

14 Taxpayer contested only the penalties assessed by the Department, arguing that his

15 failure to act was not negligent. Taxpayer presented exhibits that detailed the Taxpayer’s

16 business relationship with a professional accountancy firm. Taxpayer mistakenly believed that

17 the professional accountancy firm had paid his New Mexico Personal Income Tax estimated

18 payments contemporaneously with their remission of federal estimated payments before the end

19 of 2022. The narrow question is whether the Taxpayer’s mistake was negligence. For the reasons

20 that follow, the assessment is upheld.

21 Presumption of correctness

22 Under NMSA 1978, Section 7-1-17 (C) (2007), the assessment issued in this case is

23 presumed correct. Consequently, Taxpayer has the burden to overcome the assessment. See

In the Matter of the Protest of Raymond Merrick, page 5 of 13.
1 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Unless otherwise specified, for the

2 purposes of the Tax Administration Act, “tax” is defined to include interest and civil penalty. See

3 NMSA 1978, Section 7-1-3 (Z) (2019); see also Regulation 3.1.1.16 (12/29/2000). Under

4 Regulation 3.1.6.13 NMAC, the presumption of correctness under Section 7-1-17 (C) extends to

5 the Department’s assessment of penalty and interest. See Chevron U.S.A., Inc. v. State ex rel.

6 Dep't of Taxation & Revenue, 2006-NMCA-50, ¶16, 139 N.M. 498, 503 (agency regulations

7 interpreting a statute are presumed proper and are to be given substantial weight). Accordingly, it

8 is a taxpayer’s burden to present some countervailing evidence or legal argument to show that

9 they are entitled to an abatement, in full or in part, of the assessment issued in the protest. See

10 N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8; see also Regulation

11 3.1.6.12 NMAC. When a taxpayer presents sufficient evidence to rebut the presumption, the

12 burden shifts to the Department to show that the assessment is correct. See MPC Ltd. v. N.M.

13 Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217.

14 The Taxpayer’s burden established under the presumption of correctness is a burden of

15 producing evidence that tends to support Taxpayer’s position. Gemini Las Colinas, LLC v. New

16 Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16, 531 P.3d 622. Once the

17 Taxpayer has produced the evidence in support of Taxpayer’s position, the Department may

18 present its evidence in support of the assessment, then it is the responsibility of the Hearing

19 Officer to weigh the evidence and determine the outcome of the protest. Id., ¶ 17.

20 Personal Income Tax Act; civil penalties.

21 The assessment in this protest arises from an application of the Income Tax Act, NMSA

22 1978, Sections 7-2-1 through 7-2-39. In New Mexico, “tax is imposed…upon the net income of

23 every resident individual.” Section 7-2-3. Taxpayer did not protest the imposition of tax on his

In the Matter of the Protest of Raymond Merrick, page 6 of 13.
1 income. The assessment of penalty was based on the non-payment of estimated tax, and the

2 untimely payment of the Personal Income Tax when due.

3 Civil negligence.

4 Under NMSA 1978, Section 7-1-69 (A) (2007), when a taxpayer fails to pay taxes due to

5 the State because of negligence or disregard of rules and regulations, but without intent to evade

6 or defeat a tax, the Department must impose a civil negligence penalty based on the tax due.

7 “There shall be added to the amount assessed a penalty” under Section 7-1-69 (A). The use of

8 the word “shall” makes the imposition of penalty mandatory in all instances where a taxpayer’s

9 actions or inactions meet the legal definition of “negligence.” See Marbob Energy Corp. v. N.M.

10 Oil Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24, 206 P.3d 135 (use of the word

11 “shall” in a statute indicates the provision is mandatory absent clear indication to the contrary).

12 Both the Department and Taxpayer agreed that there was no willful attempt to evade tax in

13 this case. The parties’ dispute rests on whether the non-payment resulted from “negligence or

14 disregard of rules and regulations.” Taxpayer testified that he believed that the estimated payment

15 had been made contemporaneously with federal estimated payments and argued that the belief was

16 reasonable and so the non-payment did not amount to negligence.

17 Negligence can be found in several ways. Regulation § 3.1.11.10 NMAC (1/15/01) defines

18 “negligence” as “failure to exercise that degree of ordinary business care and prudence which

19 reasonable taxpayers would exercise under like circumstances; inaction by taxpayers where action is

20 required; inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or inattention.”

21 Non-payment of personal income tax is certainly negligence under the definition, here, as “inaction”

22 when “action is required.” Even if unintentional or inadvertent, the inaction is negligence. See El

23 Centro Villa Nursing Center v. Taxation & Revenue Department, 1989-NMCA-070, ¶ 10, 108 N.M.

In the Matter of the Protest of Raymond Merrick, page 7 of 13.
1 795, 779 P.2d 982 (Section 7-1-69 (A) is designed specifically to penalize unintentional failure to

2 pay tax.).

3 Taxpayer, suggested that he relied on his accountant to report and pay his personal income

4 taxes. The suggestion creates a colorable claim of nonnegligence. Regulation 3.1.11.11 (1/15/01)

5 provides indicators of nonnegligence. One of these indicators, section (D), provides relief from

6 negligence penalties if: “the taxpayer proves that the failure to pay tax or to file a return was caused

7 by reasonable reliance on the advice of competent tax counsel or accountant as to the taxpayer's

8 liability after full disclosure of all relevant facts; failure to make a timely filing of a tax return,

9 however, is not excused by the taxpayer's reliance on an agent.” Regulation 3.1.11.11 NMAC.

10 Taxpayer presented as evidence an email confirmation that his federal estimated tax

11 payments had been accepted, and Taxpayer’s own testimony to support Taxpayer’s claims.

12 The email confirmation reads, in pertinent part:

13 Taxpayer Name: Raymond H. Merrick TIN: xxxxxxxxx
14 Deposit Confirmation
15 Your payments have been accepted.
16 Payment Successful
17 An EFT Acknowledgment Number has been provided for this payment.
18 Please keep this number for your records.
19 ***
20 Tax form 1040 US Individual Income Tax Return
21 Tax Type Estimated 1040ES
22 Tax Period 2022
23 ***
24 Payment Date 12/23/2022

25 The evidence presented is specific as to the federal 1040 ES payment, but does not explicitly

26 extend to the primary issue of submitting a New Mexico PIT estimated payment. While the

In the Matter of the Protest of Raymond Merrick, page 8 of 13.
1 engagement letter (contract) with the accountancy firm affirmatively states that the firm will

2 “prepare your 2022 federal and state income tax returns” the engagement letter does not contract

3 to make payments on Taxpayer’s behalf. Additionally, the engagement letter is directed to the

4 company name, Cybersec Consulting, not the individual Taxpayer.

5 While it is commonplace that there are so-called “handshake” deals and understandings

6 between individuals and their accountants, the contract itself only mentions the company name

7 as a party to the contract. It is sometimes a difficult hurdle for individuals to understand and give

8 full weight to the fact that an individual may have several business alter-egos. The business is its

9 own legal entity. And the owner/member/founder and sole employee of the business is its own

10 legal entity. The Taxpayer here is a distinct legal entity, as is the business. The contract

11 presented, within the four corners of the document, does not provide assurance to the Taxpayer

12 (the individual) that state taxes will be paid on behalf of the Taxpayer.

13 Taxpayer’s rationale for the non-payment of the tax was reliance on a message from his tax

14 accountant, confirming that personal estimated taxes paid to the federal government. The message

15 did not mention state taxes, so the misunderstanding was not reasonable. The non-payment of taxes

16 when due was negligence.

17 Because the documentation relied upon does not mention New Mexico personal income

18 taxes for the Taxpayer, the documentation, coupled with the Taxpayer’s (mis)understandings do not

19 overcome the presumption of correctness of the assessment. “Unsubstantiated statements that the

20 assessment is incorrect cannot overcome the presumption of correctness.” Regulation 3.1.6.12

21 NMAC. Therefore, in a strict sense, the Taxpayer by producing no corroborating evidence failed

22 to overcome the burden of production, therefore failed to overcome the presumption of

23 correctness that attached to the assessment. Gemini Las Colinas, 2023-NMCA-039, ¶ 16.

In the Matter of the Protest of Raymond Merrick, page 9 of 13.
1 Credibility of witnesses plays a role in the decisions of the Hearing Officer. “[I]t is well-

2 settled in New Mexico that the testimony of a single witness, if found credible by the fact-finder, is

3 sufficient to constitute substantial evidence.” Process Equip. & Serv. Co., Inc. v. New Mexico

4 Taxation Revenue Dep't, 2023-NMCA-060, ¶ 31, 534 P.3d 1043, 1053, cert. denied sub nom.

5 Process Equip. v. NM Tax & Rev, 2023-NMCERT-010, ¶ 31, 547 P.3d 102. And

6 “[i]t is the sole responsibility of the trier of fact to weigh the testimony, determine the credibility of

7 the witnesses, reconcile inconsistencies, and determine where the truth lies.” N.M. Taxation &

8 Revenue Dep’t v. Casias Trucking, 2014-NMCA-099, ¶ 23, 336 P.3d 436; see also In the matter of

9 the Protest of Trader Barb’s Old Town, Decision and Order #23-10, issued May 10, 2023, 2023

10 WL 3601271 (non-precedential). Here, Taxpayer was credible, and the Department witness was

11 credible. However, the documentation provided did not present a reasonable basis for the

12 misunderstanding that Taxpayer’s taxes had been timely paid by his accountant. Therefore, the

13 testimony alone, because the belief was based on documentation that does not support the belief

14 attested to, is insufficient to overcome the presumption.

15 Underpayment penalty.

16 The Department assessed an underpayment penalty pursuant to NMSA 1978, Section 7-2-

17 12.2 (G) (2011). In instances where a taxpayer is a W-2 employee, the employer withholds and pays

18 taxes for the individual on a regular basis. Where a taxpayer receives a 1099, the individual

19 independent contractor is expected to make quarterly payments of estimated personal income tax

20 based on the prior year’s tax, or at least 90% of the current year’s anticipated tax. See Section 7-2-

21 12.2 (B).

22 Because the Taxpayer’s estimated taxes were not paid timely, the underpayment penalty

23 was imposed. As noted above, the reliance on documentation from the accountancy firm does not

In the Matter of the Protest of Raymond Merrick, page 10 of 13.
1 excuse the lateness of the payment. Assessment of the underpayment penalty was compelled by law

2 and was properly assessed in this case.

3 Conclusion.

4 Taxpayer has an initial burden of production to overcome the presumption of correctness of

5 the assessments and the ultimate burden of persuasion by the preponderance of evidence to prevail

6 in this protest. See Gemini Las Colinas, LLC, 2023-NMCA-039, ¶ 29. Taxpayer presented

7 evidence in the form of testimony and documentation that federal estimated taxes were paid,

8 however, there was no evidence to suggest that state estimated taxes for 2022 were paid before

9 November 14, 2023, several months late. The evidence presented is insufficient to overcome the

10 presumption of correctness and did not touch on state taxes. Taxpayer was unable to overcome the

11 presumption of correctness in the assessment, and unable to overcome the burden of a

12 preponderance of proof or persuasion as to show the assessment was made in error. See Gemini,

13 2023-NMCA-039, ¶ 29. The Department showed that Taxpayer did not pay the personal income

14 tax due for 2022 in equal quarterly installments, or by April 15, 2023. The Department showed that

15 penalties and interest accrued on the outstanding tax principal up until November 14, 2023, when

16 the underlying tax was paid in full. As of the date of the hearing, Taxpayer’s outstanding debt for

17 2022 was $1,392.26.

18 CONCLUSIONS OF LAW

19 A. Taxpayer filed a written protest to Department’s Notice of Assessment [Letter ID

20 No. L1770123888] and jurisdiction lies over the parties and the subject matter of this protest. See

21 NMSA 1978, Section 7-1-24 (A), (B) and (E) (2019); see also NMSA 1978, Section 7-2-3 (1981)

22 and Section 7-2-12 (2016).

In the Matter of the Protest of Raymond Merrick, page 11 of 13.
1 B. The first scheduling hearing was timely set and held within 90-days of the

2 Department’s hearing request under NMSA 1978, Section 7-1B-8 (F) (2019).

3 C. Taxpayer bears the burden of overcoming the presumption of correctness that

4 attached to the Department’s Assessment. Taxpayer failed to overcome the presumption of

5 correctness, as the evidence presented did not establish payment of state taxes. See NMSA 1978,

6 Section 7-1-17 (C) (2007); see also Regulation §3.1.8.10 NMAC (08/30/2001); see also Gemini

7 Las Colinas, LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16, 531

8 P.3d 622; see also Regulation 3.1.6.12 NMAC.

9 D. Taxpayer’s evidence, weighed against the Department’s evidence was insufficient to

10 find by a preponderance of evidence that Taxpayer timely paid New Mexico Personal Income Tax

11 for year 2022. The Department met its burden of establishing a preponderance of evidence to

12 support that the Assessment was properly issued. See NMSA 1978, Section 7-1-18 (C) (2021); see

13 also Gemini Las Colinas, LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-

14 039, ¶ 29, 531 P.3d 622.

15 For the foregoing reasons, the Taxpayer’s protest IS DENIED.

16 DATED: February 25, 2025

17
18 Ignacio V. Gallegos
19 Hearing Officer
20 Administrative Hearings Office
21 Post Office Box 6400
22 Santa Fe, NM 87502

23 NOTICE OF RIGHT TO APPEAL

In the Matter of the Protest of Raymond Merrick, page 12 of 13.
1 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

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

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

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

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

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

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

8 Hearings Office may begin preparing the record proper. The parties will each be provided with a

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

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

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

12 CERTIFICATE OF SERVICE

13 On February 25, 2025, a copy of the foregoing Decision and Order was submitted to the

14 parties listed below in the following manner:

15 Email and First Class Mail Email and First Class Mail
INTENTIONALLY BLANK

16
17

18 _______
19 Chris Romero
20 Administrative Hearings Office
21 Post Office Box 6400
22 Santa Fe, NM 87502
23 [email protected]

In the Matter of the Protest of Raymond Merrick, page 13 of 13.