Steve & Sheila Lambert

13-4

The Taxpayers moved to New Mexico in the fall of 2006, and were full-time residents for tax year 2007.  The Taxpayers filed a New Mexico income tax return for tax year 2007, but did not report retirement income from South Dakota or interest income on their return.  On March 16, 2011, the Taxpayers received a notice of limited scope audit indicating that they had underreported their income.  On September 1, 2011, the Department assessed the Taxpayers for personal income tax, penalty and interest for tax year 2007.  The Taxpayers filed a protest to this assessment.  The Taxpayers stated that they did not believe the retirement income was taxable because it was earned in South Dakota, which does not have income tax.  At the hearing, the Taxpayers acknowledged that they should have reported the unreported income.  It was also found that there was a discrepancy between the amount of tax due, less tax withheld and payments made, so the hearing officer found that the Taxpayers owed only the remaining balance of principal tax, plus penalty and interest.  The Taxpayers protest was granted in part and denied in part.