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Joseph D. & Rebecca A. Chwirka



On August 10, 2016, the Department assessed the Taxpayer an underpayment penalty for Personal Income Tax for the tax year ending December 31, 2015.  On August 23, 2016, Ms. Chwirka filed a protest of the assessment.  The Taxpayer’s were married for 36 years.  Until his illness and death, Mr. Chwirka had always prepared the Taxpayers’ income tax returns.  The Taxpayer were never required to make estimated payments in previous tax years as their annual payments were always accomplished through withholdings.  In March 2015, Mr. Chwirka was diagnosed with cancer.  He maintained employment as long as he could, which was until October 2015.  He received disability income for October, November and December 2015.  There were no withholdings from this disability income.  Mr. Chwirka passed away in January 2016.  Ms. Chwirka sought assistance in preparing the Taxpayers’ 2015 personal income tax returns.  When the New Mexico return was prepared, the total payments and credits through withholding were significantly less that the Taxpayers’ liability.  The tax due was paid on March 29, 2016, prior to the due date.  The Department assessed the underpayment penalty because the required annual payment requirement is 90 percent of the tax liability for 2015, or 100 percent of the tax liability for 2014.  The Taxpayer does not protest the income tax due for 2015, and the Department did not assess interest.  The only issue at hearing was the Taxpayer’s request that penalty be abated because of the circumstances.  The hearing officer found that the Department correctly assessed the Taxpayer’s as a result of their annual underpayment.  However, the hearing officer also found that one of the indicators of non-negligence listed in Regulation NMAC, which allows abatement of penalty for non-negligence, was applicable in this situation.  One of the factors listed for finding a taxpayer non-negligent is for a taxpayer who is disabled because of injury or prolonged illness, and who demonstrates inability to prepare a return and make payment and is unable to procure the services of another because of this injury or illness.  Due to this, the hearing officer ordered the penalty to be abated. The Taxpayer’s protest was granted.