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Timothy & Diane Tuttle



Taxpayer filed a 1994 personal income tax return as a first-year resident having income earned in New Mexico and another state. Taxpayer did not understand New Mexico’s method of allocating income between New Mexico and the other state and therefore devised his own method of allocating his income and the allowable federal exemption amount. While processing the Department noticed an error in the federal exemption amount and recalculated the taxpayer’s tax liability, which increased the taxpayer’s refund amount. In 1997, the Department discovered a discrepancy between amounts reported on the taxpayer’s federal return and their New Mexico return. Based on this information the Department recalculated the taxpayer’s liability again and assessed the taxpayer for additional tax, penalty and interest. Taxpayer claimed that penalty and interest should not be imposed on the additional refund the Department had calculated. Taxpayer’s liability for penalty and interest was attributable to taxpayer’s lack of knowledge of New Mexico law and failure to seek advice concerning his tax obligation. Protest denied.