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Kimberly and William Flores



The Taxpayer engaged in babysitting services for pay from the State of New Mexico, CYFD, in the years 2005 and 2006.  The Taxpayers filed their 2005 and 2006 personal income tax returns indicating income from these services on Schedule C of their federal returns, but they failed to file gross receipts returns.  The Department assessed Taxpayers for unpaid gross receipts tax, penalty and interest for both 2005 and 2006, and applied an refund to offset the tax liability due. Taxpayers were engaged in business and are responsible for the gross receipts tax and interest. The Department correctly offset the rebate amount and Taxpayers are not entitled to a refund of the offset rebate as the Department acted properly in applying the offset to the outstanding liability.  In regard to the penalty, the Department was ordered to abate any penalty imposed above 10% as the law increasing penalty to 20% was not in place at the time these taxes were due.  The Taxpayers protest was granted in part and denied in part.
NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision.  (Case No. 30,932)