If I never filed my New Mexico income tax returns and the state assesses me, can I beat the assessment just by claiming business deductions without records?

Plain-English summary

Robert Duran was a New Mexico resident who earned income but did not file federal or state personal income tax returns for 2016 through 2021. The IRS flagged that he had earned income, and the New Mexico Taxation and Revenue Department, after contacting him repeatedly, issued an assessment for those six years: $8,964 in tax, $1,792.80 in penalty, and $2,211.91 in interest. The Department later abated the penalties, so only tax and interest were left when he protested. The Hearing Officer denied his protest for all years except 2017, where a partial abatement was granted.

(NM's online index and the PDF filename label this decision "Richard Duran," but the decision itself names the taxpayer Robert Duran; this page uses the name from the decision.)

The core problem was proof. A New Mexico assessment is presumed correct, and the taxpayer must come forward with evidence to disprove it. Mr. Duran argued he actually owed nothing because Schedule C business deductions wiped out his taxable income, but he produced no receipts, invoices, or other records for his business or its expenses — one claimed category (car and truck expenses) even conflicted with his testimony that he had to rely on public transportation after a heart attack. The Hearing Officer was sympathetic to his health and hardship but held that "unsubstantiated statements that the assessment is incorrect cannot overcome the presumption of correctness," and that hardship does not relieve a taxpayer of the duty to substantiate claimed deductions. The one piece of hard evidence he offered was a 2017 Form 1099 showing $226.44 withheld for New Mexico tax; because the Department did not show that amount had already been credited, the 2017 tax was reduced by $226.44 and its interest adjusted. Interest on the remaining years stood, because interest on unpaid tax is mandatory.

What this means for you

People who haven't filed (non-filers)

If you don't file, the Department can build an assessment from IRS income data, and that assessment starts out presumed correct. Simply asserting "I had deductions that zero this out" won't work — you have to document the income picture and every deduction. Filing late returns the day before a hearing, with no supporting records, is not enough.

Anyone claiming business deductions

Deductions and exemptions are read strictly against the taxpayer, and you must "clearly establish" your right to them with actual records. Keep receipts, invoices, and mileage logs. A deduction you can describe but can't prove will be disallowed, even if it is real.

Taxpayers relying on withholding

Withholding you can document with a W-2 or 1099 is a credit the Department must account for. Here, a single 1099 showing $226.44 of New Mexico withholding produced the only relief in the case — because it was on paper. If you believe tax was withheld, produce the form.

Tax professionals

The decision is a clean application of the presumption-of-correctness framework: 3.1.6.12(A) NMAC and NMSA 1978, Section 7-1-17 put the burden on the taxpayer; Gemini Las Colinas (2023-NMCA-039) supplies the burden-shifting sequence (once the taxpayer produces some evidence of incorrectness, the Department must then support its number). Only the 2017 withholding met that bar. Penalty abatement was not at issue (the Department had already abated), and interest under Section 7-1-67 is mandatory and tracks the corrected tax.

Common questions

Q: The state assessed me for years I never filed. Isn't the burden on them to prove I owe it?
A: No. Once the Department issues an assessment, New Mexico law presumes it correct, and you have the burden of coming forward with evidence that disputes it. Unsupported assertions don't move that burden.

Q: I really did have business expenses — why were they disallowed?
A: Because they weren't documented. Deductions are construed strictly in favor of the taxing authority, and the taxpayer must clearly establish the right to them with records like receipts and invoices. The Hearing Officer disallowed the claimed expenses for lack of any supporting evidence.

Q: I had serious health and personal hardships. Doesn't that help?
A: The Hearing Officer acknowledged the hardships but held they do not relieve a taxpayer of the obligation to substantiate claims. Hardship can be relevant to penalties, but the penalties here had already been abated.

Q: Why did 2017 come out differently?
A: For 2017 the taxpayer produced a Form 1099 showing $226.44 had been withheld for New Mexico. The Department didn't show that withholding was already credited, so the 2017 tax was reduced by $226.44 and the interest adjusted. No other year had that kind of documentation.

Q: Can I rely on this decision for my own situation?
A: Not directly. A Decision and Order resolves one taxpayer's protest on its specific facts; it is not a general ruling or advisory opinion of the Department. It does illustrate how strictly the recordkeeping and burden-of-proof rules are applied.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-2-3 (1981) — tax levied on the net income of every resident
• NMSA 1978, § 7-1-17 (2007) — assessments are presumed correct
• NMSA 1978, § 7-1-67(A) (2013) — interest on tax not paid when due (mandatory)
• NMSA 1978, § 7-1B-8 (2019) — protest jurisdiction and 90-day hearing requirement
• Regulation 3.1.6.12(A) NMAC (2001) — unsubstantiated statements cannot overcome the presumption of correctness
• Regulation 3.1.6.13 NMAC (2001) — presumption of correctness extends to penalty and interest
• Regulation 22.600.3.24(B) NMAC (2020) — the taxpayer has the burden of proof

Cases:

• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039 (burden of proof; once the taxpayer shows factual incorrectness, the Department must support its assessment)
• El Centro Villa Nursing Ctr. v. Taxation and Revenue Dep't, 1989-NMCA-070 (assessments presumed correct)
• Sec. Escrow Corp. v. State Taxation and Revenue Dep't, 1988-NMCA-068 (deductions construed strictly against the taxpayer; right must be clearly established)
• Public Services Co. v. N.M. Taxation and Revenue Dep't, 2007-NMCA-050 (burden on taxpayer to prove entitlement to exemptions or deductions)
• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013 ("shall" makes the assessment of interest mandatory)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Richard Duran
• Decision PDF: D&O 26-01

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 ROBERT DURAN
5 v. AHO No. 25.04-007A
6 TAXATION AND REVENUE DEPARTMENT D&O No. 26-01

7 DECISION AND ORDER
8 On October 16, 2025, Hearing Officer Dee Dee Hoxie, Esq. conducted an in-person

9 hearing on the merits of the protest to the assessment. The Taxation and Revenue Department

10 (Department) was represented by Christopher Orton, Staff Attorney. Johnson Chandler, Auditor,

11 appeared as a witness for the Department. Robert Duran (Taxpayer) was present and represented

12 himself. The main issue to be decided is whether the Taxpayer is liable for the tax and interest

13 assessed for the 2016, 2017, 2018, 2019, 2020, and 2021 tax years. Penalty was also applied in

14 the original assessment; however, the Department has abated the penalties, so only the tax and

15 interest remained at issue. The Hearing Officer considered all of the evidence and arguments

16 presented by both parties. Because the Taxpayer failed to prove that he did not owe the assessed

17 tax for each tax year except 2017, the Hearing Officer finds in favor of the Department for all

18 years except for 2017, for which a partial abatement is warranted.

19 Mr. Duran and Ms. Chandler testified at the hearing. The Hearing Officer took notice of

20 all documents in the administrative file. The Department provided an exhibit during the hearing,

21 which will be referred to as Exhibit A (the updated liability). The Taxpayer provided exhibits

22 during the hearing. The Department objected to the exhibits as they had not been provided as

23 required by the Scheduling Order. The objection was overruled because both parties failed to

24 follow the Scheduling Order by failing to file prehearing statements and by failing to prefile

25 copies of their exhibits. The Taxpayer’s exhibits were admitted, but the Taxpayer failed to mark

26 and paginate them as directed. Therefore, the Hearing Officer will refer to them generally as
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1 Exhibit 1 (documents for the 2016 tax year); Exhibit 2 (documents for the 2017 tax year);

2 Exhibit 3 (documents for the 2018 tax year); and Exhibit 4 (documents for the 2019 tax year)

3 without specific page references. The Department requested additional time to review the

4 Taxpayer’s exhibits and to supplement the record later. The request was granted, and the

5 Department was given until December 19, 2025 to submit additional evidence or to file

6 additional objections or arguments. Nothing further was filed by the deadline. IT IS DECIDED

7 AND ORDERED AS FOLLOWS:

8 FINDINGS OF FACT
9 Procedural Findings

10 1. On July 2, 2024, the Department issued an assessment to the Taxpayer for the tax

11 years from 2016 through 2021 for personal income taxes, showing a liability for tax of

12 $8,964.00, penalty of $1,792.80, and interest of $2,211.91, for a total outstanding liability of

13 $12,968.71. [Admin. file L1734562160].

14 2. On September 30, 2024, the Taxpayer filed a timely written protest to the

15 assessment. [Admin. file protest].

16 3. On November 3, 2024, the Department acknowledged its receipt of the protest.

17 [Admin. file L0788718960].

18 4. On December 31, 2024, the Department abated the penalties that were assessed.

19 [Admin. file L2016474480; Testimony of Ms. Chandler].

20 5. On April 22, 2025, the Department filed a request for hearing and an answer to

21 the protest with the Administrative Hearings Office. [Admin. file request].

22 6. On May 23, 2025, a telephonic scheduling hearing was conducted, which was

23 within 90 days of the request as required by statute. [Admin. file].

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1 Substantive Findings

2 7. The Taxpayer was a resident of New Mexico who earned personal income in

3 2016, 2017, 2018, 2019, 2020, and 2021 (the tax years). [Testimony of Taxpayer; Testimony of

4 Ms. Chandler; Exhibit 1; Exhibit 2; Exhibit 3; Exhibit 4].

5 8. The Taxpayer came to the Department’s attention based on IRS report indicating

6 that the Taxpayer had earned income. [Testimony of Ms. Chandler].

7 9. The Department researched the Taxpayer’s account and found that the Taxpayer

8 did not file federal or state personal income tax returns for the tax years. [Testimony of Ms.

9 Chandler].

10 10. The Department contacted the Taxpayer several times regarding the discrepancy

11 and his lack of New Mexico income tax filings. [Testimony of Ms. Chandler; Testimony of

12 Taxpayer].

13 11. The Taxpayer did not have his tax records for the tax years. [Testimony of Ms.

14 Chandler; Testimony of Taxpayer].

15 12. The Taxpayer gave various reasons for his lack of records, including that he had a

16 house fire and that some woman had taken his documents and disappeared. [Testimony of Ms.

17 Chandler].

18 13. The Taxpayer disputes the amount of tax owed for the tax years because he

19 believes that he had taxes withheld and is entitled to claim various deductions and exemptions.

20 [Testimony of Taxpayer; Testimony of Ms. Chandler].

21 14. The Taxpayer hired an enrolled agent or an accountant to assist him with his taxes

22 for the tax years after he received the assessment. [Testimony of Taxpayer; Testimony of Ms.

23 Chandler].

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1 15. The Department requested documentation of the Taxpayer’s income, expenses,

2 what deductions he was claiming, and documents to support any deductions claimed. The

3 Department requested documents from the Taxpayer and his enrolled agent. [Testimony of Ms.

4 Chandler; Testimony of Taxpayer].

5 16. The Department received a call from the enrolled agent to advise that the agent

6 was no longer representing the Taxpayer and that the Taxpayer had never provided the agent

7 with any documentation for the tax years. [Testimony of Ms. Chandler].

8 17. The day before the hearing on the merits, the Taxpayer filed tax returns that claim

9 he owes no New Mexico tax for 2016, 2017, 2018, and 2019. The Taxpayer did not provide any

10 evidence for the 2020 and 2021 tax years. [Testimony of Taxpayer; Exhibit 1; Exhibit 2; Exhibit

11 3; Exhibit 4].

12 18. The Taxpayer’s claim relies mainly on business expenses claimed on his Schedule

13 C forms, which serve to lower his taxable income substantially. [Exhibit 1; Exhibit 2; Exhibit 3;

14 Exhibit 4].

15 19. The Taxpayer did not testify about his business or about his business expenses.

16 [Testimony of Taxpayer].

17 20. The Taxpayer’s testimony concentrated on his personal hardships that began in

18 2016 when he had a heart attack. The Taxpayer explained that he had really slowed down due to

19 his health issues and slow recovery. [Testimony of Taxpayer].

20 21. The Taxpayer also worked with the Department to get a hardship payment plan,

21 which can be renewed yearly, but the Taxpayer failed to comply with the plan and never made

22 any payments. [Testimony of Ms. Chandler; Testimony of Taxpayer].

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1 22. One of the Taxpayer’s major business expenses claimed is related to car and truck

2 expenses. [Exhibit 1; Exhibit 2; Exhibit 3; Exhibit 4]. However, the Taxpayer’s testimony was

3 that he largely had to use public transportation after his heart attack. [Testimony of Taxpayer].

4 23. The Taxpayer did not provide any evidence to support his claimed business

5 expenses, such as invoices or receipts. [Testimony of Taxpayer; Exhibit 1; Exhibit 2; Exhibit 3;

6 Exhibit 4].

7 24. The Taxpayer provided evidence of his income only for the 2017 tax year by

8 providing copies of several 1099 forms for that year. One of the 1099 forms shows an amount

9 withheld for state tax of $226.44, but none of the other forms show any withholding. [Exhibit 2].

10 DISCUSSION

11 “The taxpayer shall have the burden of proof, except as otherwise provided by law.”

12 22.600.3.24 (B) NMAC (2020). Assessments by the Department are presumed to be correct. See

13 NMSA 1978, § 7-1-17 (2007). See El Centro Villa Nursing Ctr. v. Taxation and Revenue

14 Department, 1989-NMCA-070, 108 N.M. 795. See also Archuleta v. O'Cheskey, 1972-NMCA-

15 165, ¶11, 84 N.M. 428. See also N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-

16 NMCA-099, ¶8. The presumption extends to the assessment of penalty and interest. See 3.1.6.13

17 NMAC (2001). “The effect of the presumption of correctness is that the taxpayer has the burden of

18 coming forward with some countervailing evidence tending to dispute the factual correctness of the

19 assessment”. 3.1.6.12 (A) NMAC (2001). The Taxpayer bears the burden of proving his case. See

20 Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep’t, 2023-NMCA-039, ¶ 27. See also

21 22.600.1.18 and 22.600.3.24 NMAC.

22 The burden is on the Taxpayer to prove that he is entitled to any exemptions or deductions.

23 See Public Services Co. v. N.M. Taxation and Revenue Dep’t., 2007-NMCA-050, ¶ 32, 141 N.M.

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1 520. See also Till v. Jones, 1972-NMCA-046, 83 N.M. 743. “Where an exemption or deduction

2 from tax is claimed, the statute must be construed strictly in favor of the taxing authority, the right to

3 the exemption or deduction must be clearly and unambiguously expressed in the statute, and the right

4 must be clearly established by the taxpayer.” Sec. Escrow Corp. v. State Taxation and Revenue

5 Dep’t., 1988-NMCA-068, ¶ 8, 107 N.M. 540. See also Wing Pawn Shop v. Taxation and Revenue

6 Dep’t., 1991-NMCA-024, ¶ 16, 111 N.M. 735. See also Chavez v. Commissioner of Revenue, 1970-

7 NMCA-116, ¶ 7, 82 N.M. 97. See also Pittsburgh and Midway Coal Mining Co. v. Revenue

8 Division, 1983-NMCA-019, 99 N.M. 545.

9 Personal income tax liability.

10 A tax is levied on the personal net income of every resident. See NMSA 1978, § 7-2-3

11 (1981). The Taxpayer did not dispute that he was a New Mexico resident who earned income

12 during the tax years. The Taxpayer claims that his business expenses provided him with deductions

13 to his taxable income and that his net income resulted in zero tax liability to New Mexico.

14 [Testimony of Taxpayer]. The Taxpayer failed to produce any evidence regarding his business or

15 its claimed expenses. The Taxpayer admitted that he did not have documents to support his claims.

16 [Testimony of Taxpayer]. The Taxpayer explained that he is still trying to recreate his documents

17 from the tax years. [Testimony of Taxpayer]. “Unsubstantiated statements that the assessment is

18 incorrect cannot overcome the presumption of correctness.” 3.1.6.12 (A) NMAC (2001). The

19 Taxpayer explained that he had health issues and personal hardships; however, such

20 circumstances do not relieve a taxpayer of the obligation to substantiate his claims. See id.

21 The only substantiated statement that the Taxpayer provided was evidence from a 1099

22 form that $226.44 was withheld from his income for the state of New Mexico in 2017. [Exhibit 2].

23 When a taxpayer has produced some evidence establishing the factual incorrectness of an

24 assessment, the Department “must put forth evidence to show the correctness of its assessment”.

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1 See Gemini Las Colinas, LLC, 2023-NMCA-039, ¶ 29. The Department did not produce evidence

2 that the amount withheld from the Taxpayer’s income in 2017 had already been credited to his 2017

3 tax liability. Therefore, the amount of tax owed by the Taxpayer for 2017 should be reduced by the

4 $226.44 that was previously withheld. The reduction in tax for 2017 is based solely on the provided

5 form 1099, which documented withholding for state income tax for New Mexico, and is not based

6 on any other claimed deductions, business expenses, or other adjustments. [Exhibit 2].

7 Assessment of Interest.

8 Interest “shall be paid” on taxes that are not paid on or before the date on which the tax is

9 due. NMSA 1978, § 7-1-67 (A) (2013). Again, the word “shall” indicates that the assessment of

10 interest is mandatory, not discretionary. See Marbob Energy Corp. v. N.M. Oil Conservation

11 Comm’n., 2009-NMSC-013, ¶ 22, 146 N.M. 24. The assessment of interest is not designed to

12 punish taxpayers, but to compensate the state for the time value of unpaid revenues. Because the

13 tax was not paid when it was due, interest was properly assessed. However, the amount of

14 interest owed for the 2017 tax year will be reduced in correspondence with the reduced amount

15 of outstanding tax liability.

16 As of the date of the hearing, the Department calculated the Taxpayer’s total tax liabilities

17 for each of the tax years with the interest owed. [Exhibit A]. For the 2016 tax year, the Taxpayer’s

18 liability in tax and interest was a total1 of $2,361.39. [Exhibit A]. For the 2017 tax years, the

19 Taxpayer’s purported liability in tax and interest was a total of $2,105.08. [Exhibit A]. The

20 Taxpayer’s purported unpaid tax for 2017 was $1,490.00. [Exhibit A]. However, since the

21 Taxpayer produced evidence that $226.44 was withheld for state income tax, the Taxpayer’s

22 liability for unpaid tax in 2017 will be $1,263.56, and interest will also be reduced accordingly. For

1
Totals correspond to the date of the hearing, but interest continues to accrue until the tax principal is paid.
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1 the 2018 tax year, the Taxpayer’s liability in tax and interest was a total of $1,909.05. [Exhibit A].

2 For the 2019 tax year, the Taxpayer’s liability in tax and interest was a total of $1,546.67. [Exhibit

3 A]. For the 2020 tax year, the Taxpayer’s liability in tax and interest was a total of $2,249.80.

4 [Exhibit A]. For the 2021 tax year, the Taxpayer’s liability in tax and interest was a total of

5 $1,859.30. [Exhibit A].

6 CONCLUSIONS OF LAW

7 A. The Taxpayer filed a timely written protest of the Department’s assessment, and

8 jurisdiction lies over the parties and the subject matter of this protest. See NMSA 1978, § 7-1B-8

9 (2019).

10 B. The first hearing was timely set and held within 90 days of the request for hearing.

11 See id. See also 22.600.3.8 NMAC (2020).

12 C. The Taxpayer was subject to the New Mexico personal income tax. See NMSA

13 1978, § 7-2-3.

14 D. The Taxpayer produced evidence on a 1099 form that the assessment was incorrect

15 as to the 2017 tax year, and the $226.44 that was previously withheld is HEREBY ABATED from

16 the assessment for the 2017 tax year and the interest owed will be adjusted accordingly. See Gemini

17 Las Colinas, LLC, 2023-NMCA-039. See also NMSA 1978, § 7-1-17. See also 3.1.6.12 NMAC.

18 E. The Taxpayer failed to produce evidence regarding his business and its claimed

19 deductions; therefore, the Taxpayer failed to overcome the presumption of correctness on the

20 remaining amounts of the assessment. See Gemini Las Colinas, LLC, 2023-NMCA-039. See

21 also NMSA 1978, § 7-1-17. See also 3.1.6.12 NMAC.

22 F. Assessment of interest was required on amounts of unpaid tax liability. See

23 NMSA 1978, § 7-1-67.

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1 For the foregoing reasons, the Taxpayer’s protest IS DENIED IN PART AND

2 GRANTED IN PART. IT IS ORDERED that Taxpayer is liable for the amounts assessed as to

3 the 2016, 2018, 2019, 2020, and 2021 tax years. IT IS ORDERED that the amount of tax

4 liability assessed as to the 2017 tax year is REDUCED by $226.44 and that interest shall be

5 reduced accordingly.

6 DATED: January 7, 2026.

7 Dee Dee Hoxie
8 Dee Dee Hoxie
9 Hearing Officer
10 Administrative Hearings Office
11 P.O. Box 6400
12 Santa Fe, NM 87502

13 NOTICE OF RIGHT TO APPEAL

14 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

15 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

16 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

17 Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

18 the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

19 Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

20 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

21 Hearings Office may begin preparing the record proper. The parties will each be provided with a

22 copy of the record proper at the time of the filing of the record proper with the Court of Appeals,

23 which occurs within 14 days of the Administrative Hearings Office receipt of the docketing

24 statement from the appealing party. See Rule 12-209 NMRA.

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1 CERTIFICATE OF SERVICE

2 On January 7, 2026, a copy of the foregoing Decision and Order was submitted to the

3 parties listed below in the following manner:

4 First Class Mail Email

INTENTIONALLY BLANK

5
6
7

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Case No. 25.04-007A
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