Crystal Gonzales

11-13

The Taxpayer was a self-employed model during tax years 2005 and 2006.  The Taxpayer consulted with H&R Block to prepare her personal income taxes for those years.  The Taxpayer’s federal income tax returns included Schedule C forms showing self-employment income for both years.  The Taxpayer did not report or file any gross receipts tax returns for that income, or consult with the Department, a certified public accountant, or an attorney to determine any potential gross receipts tax liabilities as a self-employed model.  The Taxpayer became aware of her gross receipts tax obligations when she received a notice of audit from the Department for tax years 2005 and 2006.  The Department assessed the Taxpayer for gross receipts tax, penalty and interest. The Taxpayer paid the assessments, but then applied for a refund.  This refund claim was denied by the Department and the Taxpayer protested this denial.  The Taxpayer argued that she relied on H&R Block for her tax preparation and states that they should have made her aware of this liability.  However, the Taxpayer’s lack of knowledge regarding her tax liabilities as a self-employed model does not excuse her from payment of the tax, or from being subject to penalty and interest.  The hearing officer did find that the Department miscalculated the penalty by using a new limit on penalty that was not in effect until 2008.  The penalty in excess of the old 10% limit was ordered to be refunded.  The Taxpayer’s protest was granted in part and denied in part.  
 NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision.  (Case No. 30,932)