Maggie M. Martinez

04-10

The taxpayer’s tax preparer filed first-year 1999 New Mexico personal income tax returns for herself and the taxpayer, using the same erroneous method to compute the tax due on both returns.  Upon audit by the Department, the tax examiner reviewing the tax preparer’s return accepted the erroneous return and told the preparer no additional tax was due.  However, the tax examiner reviewing the taxpayer’s return discovered the incorrect computations on the taxpayer’s Form PIT-B and the taxpayer was assessed for an additional $169.00 of tax principal, plus penalty and interest.  The taxpayer chose to believe that the first tax examiner, who accepted the tax preparer’s return, was correct, and the taxpayer protested the assessment issued against her.  In subsequent letters, the Department advised the taxpayer that penalty and interest would continue to accrue on the unpaid tax principal and explained the correct method for calculating tax on the income of first-year residents.  The taxpayer then withdrew her protest to the assessed tax principal.  The hearing officer denied the remaining protest of assessed interest, finding no basis for excusing the taxpayer from paying the full amount of interest due on her underpayment of 1999 income tax.  The hearing officer granted the protest of the assessed penalty, citing the taxpayer’s reasonable reliance on the advice of her tax preparer as justification for abatement of the penalty under the provisions of Regulation 3.1.11.11 NMAC.