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Marcos and Cristina Rayas


On September 28, 2020, the Department issued an assessment to the Taxpayer for personal income tax, penalty and interest for tax year 2014. On October 28, 2020, the Taxpayer submitted a timely protest of the assessment. In 2014, while living and working in Colorado, the Taxpayer borrowed money from his retirement account. Later in 2014 the Taxpayer moved to New Mexico and began working there. Since the Taxpayer had stopped making payments on the borrowed amount from the retirement, under the IRS rules the retirement was distributed effective December 2014, making the income taxable. The Taxpayer argued that since the contributions that made up the retirement account were made entirely in Colorado, not in New Mexico, no income tax for New Mexico should be owed. But the Hearing Officer determined that under the law this was not the case. Federal law permits that states may tax the income of their residents earned in other states and that this includes retirement income. A distribution from a retirement account is part of federal adjusted gross income and, under New Mexico statute, is a part of gross income when determining income tax for the state. Retirement income is taxable in the state if the Taxpayer is a resident of the state when the distribution takes place. Since the distribution under the IRS rules took place in December while the Taxpayer was a resident of New Mexico, the Hearing Officer determined that the distribution was taxable and ordered the protest denied.