Donald W. Krumrey



On August 3, 2016, the Department assessed the Taxpayer for underpayment penalty of personal income estimated payments for the 2015 tax year. The Taxpayer paid the assessed penalty and filed an application for refund with the Department on October 9, 2016. After 120 days had elapsed without the Department approving or denying the Taxpayers claim for refund the Taxpayer filed a formal protest which was received by the Department on February 13, 2017. The Taxpayer moved to New Mexico in 2014 and relied on the personal income tax instructions to file his return. The Taxpayers primary sources of income for the relevant period were from pensions. From those pensions, only federal tax was withheld. The Taxpayer argued that based on the instructions he did not believe that he was required to make estimated payments in 2015. The Taxpayer believed that as the instructions were not clear on the requirements that the underpayment penalty should be abated. The Department argued that the information was in the instruction packet for personal income tax and that as there was no state withholding taken out from the Taxpayers pensions that the Taxpayer was required to pay estimated payments in order to avoid the underpayment penalty of tax due. Based on Section 7-2-12.2 (A) NMSA 1978, annual payments in installments through withholding or estimated tax payments are required by taxpayers. The Department is required to assess a penalty when a taxpayer underpays the required annual payments based on Section 7-1-67 (B) NMSA 1978. For the period at issue, withholding or estimated payments were not made and the calculation of underpayment penalty was not disputed by the Taxpayer. Although, the Taxpayer believes that the instruction were inadequate. During the hearing, the Taxpayer admitted that the instructions were not fully reviewed. The Hearing Officer determined that based on the statutes use of the word shall that the underpayment penalty is mandatory in all instances where a taxpayer fails to make the required annual payment due to negligence. The Taxpayer failed to overcome the presumption of correctness and the Department’s assessment was correct. For the reasons above, the Taxpayer’s protest is denied.