Could retirees count a 2012 balance paid in 2013 as a 2013 estimated payment while excluding their January 2014 quarterly estimate?
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This page answers the general question as of 2014. Ezel answers yours, under current New Mexico tax law, with citations.
Plain-English summary
Roger and Louise Bumstead could not classify payments by the calendar year in which the checks cleared. Their April 2013 payment satisfied their 2012 tax balance, while a January 2014 quarterly estimate applied to tax year 2013.
The retired taxpayers had no wage withholding, so they made quarterly estimated payments. For tax year 2013, they paid four $200 installments—on April 29, June 11, and September 12, 2013, and January 14, 2014—for a total of $800.
They used AARP services at the Bear Canyon Senior Center to prepare their 2013 return. Line 29 reported $1,410 of estimated payments, but that amount combined payments from the wrong periods.
The April 2013 payment belonged to tax year 2012
On April 1, 2013, the Bumsteads filed their 2012 return and electronically paid its $810 balance. Although the transaction happened during calendar year 2013, it paid their tax-year 2012 obligation and was credited accordingly.
The annual filing rule contemplated that payment for one tax year could occur by April 15 of the following calendar year. The $810 therefore was not an estimated payment toward 2013 and did not belong on the 2013 return's estimated-payment line.
The January 2014 estimate belonged to tax year 2013
The Bumsteads made the opposite mistake with their fourth quarterly installment. They left the January 2014 payment off the 2013 return, apparently because it was paid in the next calendar year.
Section 7-2-12.2(D), however, set the quarterly due dates as April 15, June 15, and September 15 of the tax year and January 15 of the following year. The January installment therefore counted toward 2013.
The Department's $518 refund was correct
The four valid 2013 estimates totaled $800. The Bumsteads' 2013 tax liability was $282, leaving a refund of $518.
The Department detected the inaccurate $1,410 entry, adjusted the return to $800, and issued the $518 refund.
Result: protest DENIED. The Return Adjustment Notice and the $518 refund were upheld.
What this means for you
Retirees and others without withholding
Track estimated payments by the tax year designated for each installment, not simply by the year in which money leaves the bank.
Taxpayers paying a prior-year balance
A balance paid with an annual return generally belongs to that return's tax year. Paying it during the next calendar year does not make it a current-year estimate.
Tax return preparers
Reconcile the estimated-payment line against agency records and payment notations. Include the fourth quarterly installment due in January when it was designated for the preceding tax year.
Common questions
Q: Why didn't the April 2013 payment count toward 2013?
A: It accompanied the 2012 return and paid the $810 tax due for 2012.
Q: Why did the January 2014 payment count toward 2013?
A: The estimated-tax statute made the fourth 2013 installment due January 15 of the following calendar year.
Q: How much did the Bumsteads actually prepay for 2013?
A: Four installments of $200, totaling $800.
Q: How was the refund calculated?
A: The decision subtracted the $282 tax liability from $800 of valid estimated payments, producing $518.
Citations and references
Statutes:
- NMSA 1978, §§ 7-2-3 and 7-2-12 — resident income tax, return, and annual payment deadline
- NMSA 1978, § 7-2-12.2 — quarterly estimated income-tax payments and due dates
Source
- Listing: New Mexico Decisions & Orders
- Decision post: Roger & R. Louise Bumstead
- Decision PDF: D&O 14-32
Original ruling text
BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO
IN THE MATTER OF THE PROTEST OF
ROGER & R. LOUISE BUMSTEAD No. 14-32
TO RETURN ADJUSTMENT NOTICE ISSUED UNDER LETTER
ID NO. L2057274320
DECISION AND ORDER
A protest hearing occurred on the above captioned matter on August 7, 2014, before
Brian VanDenzen, Esq., Hearing Officer, in Santa Fe. Mr. Roger Bumstead appeared pro se for
himself and Louise Bumstead (“Taxpayers”). Staff Attorney Elena Morgan appeared
representing the State of New Mexico, Taxation and Revenue Department (“Department”).
Protest Auditor Sonya Varela appeared as a witness for the Department. Taxpayer Exhibits 1-9
and Department Exhibit A-C were admitted into the record, as described more thoroughly in the
Administrative Protest Hearing Exhibit Log. Based on the evidence and arguments presented, IT
IS DECIDED AND ORDERED AS FOLLOWS:
FINDINGS OF FACT
- On April 4, 2014, under letter id. number L2057274320, the Department sent
Taxpayers a Return Adjustment Notice.
- On May 20, 2014, Taxpayers protested the Department’s April 4, 2014 Return
Adjustment Notice.
- On July 18, 2014, the Department requested a hearing in this matter with the
Hearings Bureau.
- On July 18, 2014, the Hearings Bureau sent Notice of Administrative Hearing,
scheduling this matter for the hearing on August 7, 2014.
- For the personal income tax year ending on December 31, 2012, Taxpayers owed
$810.00 in New Mexico personal income tax. [Department Ex. A].
- On April 1, 2013, Taxpayers submitted their 2012 personal income tax return and
electronic debit payment of $810.00 for their outstanding 2012 personal income tax obligation.
[Department Ex. A and Taxpayer Ex. #3].
- Even though the payment was made on April 1, 2013, since the payment was to
satisfy the amount of 2012 personal income tax due under that return, the Department credited
the $810.00 payment to Taxpayers’ 2012 personal income tax.
- For personal income tax year 2013, since Taxpayers are retired without any wage
withholdings, Taxpayers made four estimated payments of income tax totaling $800.00.
[Department Ex. B].
a. On April 29, 2013, Taxpayer made a $200.00 estimated payment of tax,
indicating on the check comments that it was for the “2013 April Quarter.”
[Department Ex. B-4 and Taxpayer Ex. #6 & #9].
b. On June 11, 2013, Taxpayer made a $200.00 estimated payment of tax indicating
on the check comments that it was for the “N.M. 2013 ¼ Inc. Tax Fund.”
[Department Ex. B-5 and Taxpayer Ex. #7 & #9].
c. On September 12, 2013, Taxpayer made a $200.00 estimated payment of tax,
indicating on the check comments Taxpayers social security numbers.
[Department Ex. B-6 and Taxpayer Ex. #8 & #9].
In the Matter of the Protest of Roger & R. Louise Bumstead, page 2 of 6
d. On January 14, 2014, Taxpayer made a $200.00 estimated payment of tax,
indicating on the check comments that it was for the “2013 Est. Tax Payment.”
[Department Ex. C].
- Taxpayers used the services of AARP at Bear Canyon Senior Center to assist in
preparation of the 2013 personal income tax returns.
- Taxpayers’ total 2013 personal income tax liability was $282.00. [Department Ex.
B-2].
- While Taxpayers in fact only made $800.00 in 2013 estimated personal income
tax payments, Taxpayers listed $1410.00 in estimated personal income tax payments on line 29
of their 2013 personal income tax return. [Department Ex. B-2].
- In error, Taxpayers’s return included their $810.00 payment of 2012 personal
income tax as a 2013 estimated income tax payment. Although the $810.00 payment occurred
during calendar year 2013, it was the payment for the outstanding 2012 personal income tax
liability, not an estimated payment towards their 2013 personal income taxes.
- In error, Taxpayers only included three of their four quarterly estimated income
tax payments totaling $600.00 as estimated income tax payments on their 2013 personal income
tax return when in fact Taxpayers made four quarterly payments towards 2013 income tax
totaling $800.00.
- The correct amount of 2013 estimated income tax payments that should have been
listed on line 29 was $800.00. With that correct amount of 2013 estimated income tax payments
listed on line 29, Taxpayers were due a refund of $518.00.
- Upon receipt of Taxpayers’ 2013 personal income tax returns, the Department
reviewed the return and its record and found that Taxpayers had only made $800.00 in estimated
In the Matter of the Protest of Roger & R. Louise Bumstead, page 3 of 6
personal income tax returns in 2013 rather than the reported $1410.00. The Department then
issued the Return Adjustment Notice identified under finding of fact #1.
- Taxpayers in fact received a refund in the correct amount of $518.00 in this
matter. [Department Ex. B-3].
DISCUSSION
Taxpayers believed that because their $810.00 payment of their 2012 personal income tax
liability occurred during calendar year 2013, that amount should be included on line 29 of their
2013 personal income tax return as part of their 2013 estimated personal income tax returns.
Further, Taxpayers did not include the quarterly $200.00 2013 estimated personal income tax
payment that they made in January of 2014 on line 29, apparently because they believed since it
was made in a different calendar year, it did not count towards their 2013 personal income taxes.
When the Department adjusted Taxpayers’ 2013 personal income tax return to reflect the
accurate $800.00 total in 2013 estimated tax payments, reducing their refund to $518.00,
Taxpayers protested that they were still entitled to a larger refund based on the $1410.00 amount
they reported as 2013 estimated tax reports.
Payment of New Mexico personal income tax is governed by NMSA 1978, §§ 7-2-1 to
- Unless otherwise exempted by law, a tax is imposed “upon the net income of every” New
Mexico resident. NMSA 1978, § 7-2-3 (1981). NMSA 1978, Section 7-2-12 (2003) requires any
resident or any person deriving income from New Mexico to file a state income tax return. Under
Section 7-2-12, the required tax return and any amount of tax due under the return are due “on or
before the fifteenth day of the fourth month following the end of the taxable year”, which is
April 15th of the next calendar year. The statute thus contemplates that a tax payment may not
occur until the calendar year following the end of the taxable year at issue.
In the Matter of the Protest of Roger & R. Louise Bumstead, page 4 of 6
Like this protest, where a taxpayer does not have any withholdings, that taxpayer is
required to make quarterly estimated payments of income tax under NMSA 1978, Section 7-2-
12.2 (2011). Under Section 7-2-12.2 (D), those quarterly estimated payments are due on “April
15, June 15, and September 15 of the taxable year and January 15 of the following taxable year.”
(emphasis added). In other words, again the statute contemplates that one estimated quarterly
payment will not be made during the taxable year but in the calendar year following the taxable
year in question.
Taxpayers’ April 1, 2013 $810.00 payment of tax was payment of Taxpayers’ 2012
personal income tax, a timely payment of 2012 personal income tax under Section 7-2-12. That
payment was credited towards Taxpayers’ 2012 personal income tax year obligations, not
towards any potential 2013 personal income tax year liabilities. Just because the 2012 personal
income tax year payment of $810.00 occurred during calendar year 2013, Taxpayers were not
entitled to include that $810.00 as an estimated 2013 personal income tax payment. The April 1,
2013 $810.00 payment was not an estimated payment towards Taxpayers’ 2013 personal income
tax year liabilities, but a payment of Taxpayers’ tax year 2012 liabilities, and thus should not
have been included on line 29 of Taxpayers’ 2013 personal income tax return.
For tax year 2013, Taxpayers made four estimated payments of tax totaling $800.00.
While the January 2014 estimated payment occurred in calendar year 2014 rather than 2013, it
still applies as an estimated payment for tax year 2013 under the deadlines established by Section
7-2-12.2 (D). Consequently, Taxpayers should have included that additional $200.00 estimated
tax payment from January 2014 on line 29 of their 2013 personal income tax return.
The Department properly detected the error on estimated tax payments reported on line
29 of Taxpayers’ 2013 personal income tax returns. The Department correctly adjusted
In the Matter of the Protest of Roger & R. Louise Bumstead, page 5 of 6
Taxpayers’ 2013 personal income tax return with the correct amount of estimated tax payments
that Taxpayers in fact made towards the 2013 personal income tax year. The Department then
issued Taxpayers the correct refund amount of $518.00. Taxpayers’ protest to the Department’s
Return Adjustment Notice is denied.
CONCLUSIONS OF LAW
A. Taxpayer filed a timely, written protest to the Return Adjustment Notice. The
hearing timely was set within 90-days of protest. Jurisdiction lies over the parties and the subject
matter of this protest.
B. Under Section 7-2-12, Taxpayers’ April 1, 2013 $810.00 payment included with
their 2012 personal income tax return was a timely payment of their year 2012 personal income
tax liability before the April 15, 2013 due date, not an estimated payment of year 2013 personal
income taxes.
C. Taxpayers timely made four estimated income tax payments for tax year 2013
totaling $800.00, including the estimated payment made in January 2014.
D. The Department properly adjusted Taxpayers return to reflect the accurate amount
of tax year 2013 estimated payments actually made and provided Taxpayers with the correct
refund of $518.00.
For the foregoing reasons, Taxpayer’ protest IS DENIED.
DATED: August 15, 2014.
Brian VanDenzen, Esq.,
Chief Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630
In the Matter of the Protest of Roger & R. Louise Bumstead, page 6 of 6
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